An increase in price:
A)causes a quantity effect.
B)causes a price effect.
C)causes a decrease in revenue that results from selling fewer units of the good,and a simultaneous increase in revenue that results from receiving a higher price for each unit sold.
D)All of these are true.

Question

Quizplus · Accepted Answer

An increase in price causes both the quantity effect (reducing the quantity demanded due to the higher price) and the price effect (increasing the revenue per unit due to the higher price). Together, these effects result in a change in total revenue, which may increase or decrease depending on the price elasticity of demand for the good. Therefore, all of the given options are true.

An Increase in Price