Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total revenue increases
B
Total revenue decreases
C
Total revenue remains unchanged
D
Total revenue fluctuates unpredictably
Understanding the Answer
Let's break down why this is correct
Answer
When the demand for a product is elastic, it means that consumers are very sensitive to price changes. If the price of the product increases, people will buy much less of it because they can find alternatives or simply choose not to buy it at all. As a result, total revenue, which is the amount of money a company makes from selling its product, will decrease. For example, if a coffee shop raises the price of its coffee, many customers might decide to switch to tea or make coffee at home instead, leading to fewer coffee sales and lower total revenue for the shop. In this case, the increase in price does not lead to more money for the business; instead, it causes them to earn less overall.
Detailed Explanation
When demand is elastic, people buy less if the price goes up. Other options are incorrect because Some might think higher prices always mean more money; It's a common mistake to think price changes don't affect revenue.
Key Concepts
Factors affecting elasticity
Total revenue and elasticity
Topic
Elasticity of Demand
Difficulty
medium level question
Cognitive Level
understand
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