If the price effect outweighs the quantity effect of a price decrease,then:
A)total revenue will decrease.
B)the good is price inelastic.
C)the measured elasticity must be greater than 1.
D)All of these are true.

Question

Quizplus · Accepted Answer

If the price effect outweighs the quantity effect of a price decrease, then total revenue will decrease. This is because the decrease in price will lead to a greater decrease in revenue than the increase in quantity sold. The good is price inelastic, meaning that the quantity demanded does not change much in response to a change in price. The measured elasticity must be greater than 1, because the percentage change in quantity demanded is less than the percentage change in price.

If the Price Effect Outweighs the Quantity Effect of a Price