A price cut will increase the total revenue a firm receives if the demand for its product is:
A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question

A price cut will increase the total revenue a firm receives if the demand for its product is:
A)​elastic.
B)​inelastic.
C)​unit elastic.
D)​unit inelastic.

Quizplus · Accepted Answer

If the demand for a product is elastic, a price cut will lead to a relatively larger increase in the quantity demanded than the decrease in price, resulting in a net increase in total revenue for the firm. In other words, the percentage increase in quantity demanded will be greater than the percentage decrease in price, causing total revenue to rise.

A Price Cut Will Increase the Total Revenue a Firm