The total revenue test says that if a price decrease leads to
A) an increase in total revenue, demand is income elastic.
B) a decrease in total revenue, demand is income inelastic.
C) a decrease in total revenue, demand is price inelastic.
D) a decrease in total revenue, supply is price inelastic.
E) a decrease in total revenue, supply is price elastic.

Question

Quizplus · Accepted Answer

According to the total revenue test, if a decrease in price leads to a decrease in total revenue, demand is price inelastic. This means that the decrease in price did not lead to a significant increase in quantity demanded. In other words, consumers were not very responsive to the price change and continued to purchase relatively the same quantity of the good or service, resulting in lower total revenue.

The Total Revenue Test Says That If a Price Decrease