Use the following to answer question(s): Demand, Elasticity, and Total Revenue

-(Exhibit: Demand, Elasticity, and Total Revenue) If price is higher than P, a decrease in price (but not below P) will result in:
A) an increase in TR.
B) a decrease in TR.
C) no change in TR.
D) none of the above, necessarily; it depends on the quantity sold.

Question

Use the following to answer question(s): Demand, Elasticity, and Total Revenue
 
-(Exhibit: Demand, Elasticity, and Total Revenue) If price is higher than P, a decrease in price (but not below P) will result in:
A) an increase in TR. 
B) a decrease in TR. 
C) no change in TR. 
D) none of the above, necessarily; it depends on the quantity sold.

Quizplus · Accepted Answer

According to the exhibit, if the price is higher than P, the demand is price elastic, which means a decrease in price will increase the quantity sold by a greater proportion than the decrease in price, resulting in an increase in total revenue. Therefore, the best choice is A, an increase in TR.

Use the Following to Answer Question(s): Demand, Elasticity, and Total