Which of the following statements is true?
A)If the price of a good is lowered and total revenue decreases, demand is elastic.
B)If the price of a good is raised and total revenue does not change, demand is perfectly elastic.
C)If the price of a good is raised and total revenue increases, demand is inelastic.
D)If the price of a good is lowered and total revenue increases, demand is inelastic.

Question

Quizplus · Accepted Answer

This statement describes the concept of inelastic demand. If a price increase leads to an increase in total revenue, demand is inelastic, meaning that consumers are willing to pay more for the good and are not very sensitive to changes in price. Conversely, if a price decrease leads to a decrease in total revenue, demand is elastic, meaning that consumers are very sensitive to changes in price and may choose to purchase substitute goods instead. Option A is incorrect as a decrease in total revenue indicates elastic demand, not inelastic demand. Option B is incorrect as total revenue cannot remain constant if demand is perfectly elastic. Option D is incorrect as an increase in total revenue indicates inelastic demand, not elastic demand.

Which of the Following Statements Is True