What is the effect of a 10 percent price increase on total revenue if elasticity is equal to 1?
A)Revenue increases by 10 percent.
B)Revenue increases by less than 10 percent.
C)Revenue does not change.
D)Revenue decreases.
E)Revenue drops to 0.

Question

Quizplus · Accepted Answer

If the price elasticity of demand is equal to 1, it means that the percentage change in quantity demanded will be equal to the percentage change in price. Therefore, a 10 percent increase in price would lead to a 10 percent decrease in quantity demanded, resulting in a total revenue that remains constant. This is because the increase in revenue per unit sold is offset by the decrease in the number of units sold. Thus, choice C is the correct answer.

What Is the Effect of a 10 Percent Price Increase