If total revenue increases as a result of a price increase:
A)the good is price elastic.
B)the good is price inelastic.
C)the good is price unit elastic.
D)Any of these could be true.

Question

Quizplus · Accepted Answer

If total revenue increases as a result of a price increase, it means that consumers are not very sensitive to the price change and are willing to pay more for the good. This indicates that the good is price inelastic, as the change in price did not have a significant effect on the quantity demanded. If the good was price elastic, a price increase would result in a decrease in total revenue, as consumers would reduce their quantity demanded to a greater extent than the price increase. If the good was price unit elastic, the increase in total revenue would be equal to the percentage increase in price. However, in this scenario, the increase in total revenue suggests that the good is price inelastic.

If Total Revenue Increases as a Result of a Price