Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P1 to P2, total revenue will
A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question

Refer to the information provided in Figure 5.4 below to answer the questions that follow.  Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P1 to P2, total revenue will
A) increase. 
B) decrease. 
C) remain constant. 
D) either increase or decrease.

Quizplus · Accepted Answer

At Point C, the demand for milkshakes is unit elastic. This means that a 1% decrease in price will lead to a 1% increase in quantity demanded. Therefore, if the milkshake price falls from P1 to P2, the quantity demanded will increase by 1%. This will lead to an increase in total revenue, as total revenue is equal to price multiplied by quantity.

Refer to the Information Provided in Figure 5