If the market price of a product falls and as a result total revenue of firms falls, we can conclude that
A) demand is elastic in this price range.
B) the product's price is above the midpoint of its demand curve.
C) demand is inelastic in this price range.
D) the demand curve is horizontal.

Question

Quizplus · Accepted Answer

If the market price of a product falls and the total revenue of firms falls as well, it means that the percentage decrease in quantity demanded is proportionately smaller than the percentage decrease in price. In other words, demand is inelastic in this price range. This is because when demand is elastic, a decrease in price will lead to a proportionately larger increase in quantity demanded, which will result in an increase in total revenue for firms. On the other hand, when demand is inelastic, a decrease in price will lead to a proportionately smaller increase in quantity demanded, resulting in a decrease in total revenue for firms.

If the Market Price of a Product Falls and as a Result