Total revenue will rise if
A)demand for a good is inelastic and its price rises.
B)demand for a good is elastic and its price rises.
C)demand for a good is inelastic and its price falls.
D)None of these choices are true.

Question

Quizplus · Accepted Answer

When demand for a good is inelastic, consumers are not very responsive to changes in price. Therefore, if the price of the good increases, the total revenue earned by the seller will also increase because the increase in revenue from the higher price is greater than the decrease in revenue from the lower quantity sold. On the other hand, if the demand for the good is elastic, consumers are very responsive to changes in price. So, if the price of the good increases, the decrease in quantity demanded will be proportionately greater, resulting in a decrease in total revenue. Therefore, option B is not correct. Option C is also not correct as a decrease in price will increase the quantity demanded only if the good is elastic, and inelastic goods will result in the same revenue.

Total Revenue Will Rise If