The demand for a good is price elastic if
A)a rise in price results in an increase in total revenue.
B)a fall in price results in a decrease in total revenue.
C)a rise in price results in a decrease in total revenue.
D)the good is a necessity.
E)the demand for the good is very insensitive to changes in price.

Question

Quizplus · Accepted Answer

If a rise in price results in a decrease in total revenue, it means that the percentage change in quantity demanded is greater than the percentage change in price. This indicates that the demand for the good is price elastic, meaning consumers are sensitive to changes in price and will reduce their demand significantly if the price increases.

The Demand for a Good Is Price Elastic If