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

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

Quizplus · Accepted Answer

Given that the price is lower than P and assuming we are on the elastic portion of the demand curve, an increase in price (but not above P) will lead to a smaller percentage decrease in quantity demanded. Therefore, total revenue (TR), which is the product of price and quantity, will increase.

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