If the supply of a good decreases and it causes total revenue to increase,this shows that the good has an
A) inelastic demand
B) elastic demand
C) unit elastic demand
D) inelastic supply
E) elastic supply

Question

Quizplus · Accepted Answer

When the supply of a good decreases, but the total revenue (price x quantity) increases, it indicates that the demand for the good is relatively insensitive to changes in price. This is called inelastic demand, where a change in price leads to a proportionately smaller change in quantity demanded. As a result, the increase in price due to the decrease in supply leads to a more than proportional increase in total revenue, which shows an inelastic demand.

If the Supply of a Good Decreases and It Causes