Which of the following statements best describes how a business determines whether to increase or decrease the price of the product it sells in order to increase revenues?
A) If the price elasticity of demand is greater than 1, total revenue and price changes move in opposite directions.
B) If the price elasticity of demand is greater than 1, total revenue and price changes move in the same direction.
C) If the price elasticity of demand is less than 1, total revenue and price changes move in opposite directions.
D) The price elasticity of demand has little to do with total revenue, and a firm must focus solely on its cost structure to increase revenues.
E) It will depend on how many firms are competing in the market.

Question

Quizplus · Accepted Answer

If the price elasticity of demand is greater than 1 (elastic), a decrease in price will lead to an increase in total revenue, and an increase in price will lead to a decrease in total revenue, meaning they move in opposite directions.

Which of the Following Statements Best Describes How a Business