If the demand for a good is price-elastic, a cut in price will:
A) lead to an increase in quantity demanded and an increase in the firm's revenue.
B) not affect the total revenue of the firm.
C) lead to a fall in the firm's revenue but an increase in quantity demanded.
D) lead to a decrease in quantity demanded.
E) decrease the firm's revenue by the same percentage as the cut in price.

Question

Quizplus · Accepted Answer

If the demand for a good is price-elastic, a cut in price will lead to a proportionately larger increase in quantity demanded, resulting in an overall increase in the firm's revenue. This is because the increase in quantity demanded will more than offset the decrease in price, resulting in a net gain for the firm.

If the Demand for a Good Is Price-Elastic, a Cut