A decrease in price:
A)causes a decrease in revenue due to the quantity effect.
B)causes an increase in revenue due to the price effect.
C)does not necessarily have to experience a quantity effect when the demand curve is downward sloping.
D)None of these is true.

Question

Quizplus · Accepted Answer

A decrease in price on a downward sloping demand curve typically leads to an increase in quantity demanded, which is the quantity effect. However, the overall impact on revenue depends on the price elasticity of demand, so a decrease in price does not necessarily have to experience a quantity effect that increases revenue.

A Decrease in Price