If the price of a good rises by 10 percent and quantity demanded falls by 20 percent,we can predict that
A)The company's total revenue will increase.
B)The company's total profit will rise.
C)The company's total revenue will decrease.
D)The company's total revenue will remain the same.

Question

Quizplus · Accepted Answer

According to the law of demand, when the price of a good increases, the quantity demanded decreases. In this case, the price has increased by 10 percent and the quantity demanded has fallen by 20 percent, meaning that consumers are very responsive to changes in the price of the good. As a result, the total revenue of the company will decrease because the decrease in quantity demanded will more than offset the increase in price. Therefore, option C is the best choice.

If the Price of a Good Rises by 10 Percent