If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to
A) rise.
B) fall.
C) stay the same.
D) either rise or fall, but it is impossible to determine which.

Question

Quizplus · Accepted Answer

When demand is inelastic (i.e., the percentage change in quantity demanded is less than the percentage change in price), lowering the price will lead to a proportionately smaller increase in quantity demanded. As a result, total revenue will fall because the decrease in price will not be sufficient to increase sales enough to offset the lower price.

If a Seller Lowers the Price of a Product When