Total revenue will fall 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 elastic and its price falls.
D)All of the choices are true.

Question

Quizplus · Accepted Answer

When demand for a good is elastic, a small increase in price results in a large decrease in quantity demanded. Therefore, if the price rises, the decrease in quantity demanded will be significant enough to cause total revenue to fall. On the other hand, when demand for a good is inelastic, a rise in price results in only a small decrease in quantity demanded, which may not be significant enough to offset the increase in price and result in a fall in total revenue.

Total Revenue Will Fall If