If the demand for a good is unit elastic, then a 5 percent increase in price results in
A)a 5 percent increase in total revenue.
B)a 5 percent decrease in total revenue.
C)no change in total revenue.
D)an increase in total revenue greater than 5 percent.
E)an increase in total revenue less than 5 percent.

Question

Quizplus · Accepted Answer

If the demand for a good is unit elastic, a 5 percent increase in price will result in a 5 percent decrease in the quantity demanded. Therefore, the increase in revenue from the higher price per unit will be offset by the decrease in the number of units sold, resulting in no change in total revenue. Hence, choice C is correct.

If the Demand for a Good Is Unit Elastic, Then