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 the same
D
Total revenue fluctuates unpredictably
Understanding the Answer
Let's break down why this is correct
Answer
When a product has elastic demand, it means that consumers will buy significantly more of it if the price decreases. This happens because people are sensitive to price changes; a lower price encourages them to buy more. As a result, when the price goes down, the total revenue, which is the money made from sales, is expected to increase because the increase in the quantity sold outweighs the loss from the lower price. For example, if a company sells ice cream and lowers the price from $5 to $4, more people may decide to buy it, leading to higher total revenue despite the lower price per scoop. Thus, with elastic demand, lowering the price can be a smart move to boost sales and revenue.
Detailed Explanation
When demand is elastic, people buy a lot more if the price drops. Other options are incorrect because Some might think lowering the price means less money; It's a common mistake to think revenue stays the same.
Key Concepts
elastic demand
Topic
Price Elasticity and Revenue
Difficulty
easy level question
Cognitive Level
understand
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