Assume that when the price of good Z is increased from $5 to $6,the total revenue earned increases from $600 to $690.Based on this information,we can conclude that over this range,demand for Z is:
A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly inelastic.

Question

Quizplus · Accepted Answer

Total revenue (TR) is calculated as Price x Quantity. In this case, we know that the price increases from $5 to $6, and therefore the quantity demanded must decrease to some extent. 
If demand were elastic (i.e. relatively responsive to price changes), the increase in price would cause a significant decrease in quantity demanded, resulting in a decrease in total revenue. 
If demand were unit elastic (i.e. the percentage change in quantity demanded is exactly equal to the percentage change in price), then the increase in price would result in a proportional decrease in quantity demanded, leaving total revenue unchanged. 
However, since the increase in price leads to an increase in total revenue, we can conclude that demand is inelastic (i.e. relatively unresponsive to price changes) over this range.

Assume That When the Price of Good Z Is Increased