A price cut will decrease the total revenue a firm receives if the demand for its product is:
A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question

A price cut will decrease the total revenue a firm receives if the demand for its product is:
A)​elastic.
B)​inelastic.
C)​unit elastic.
D)​unit inelastic.

Quizplus · Accepted Answer

When demand is inelastic, a price cut will decrease total revenue because the percentage decrease in price is not offset by a sufficiently large percentage increase in quantity demanded.

A Price Cut Will Decrease the Total Revenue a Firm