Learning Path
Question & Answer1
Understand Question2
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Explore TopicChoose the Best Answer
A
True
B
False
Understanding the Answer
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Answer
The statement is true: when demand is elastic, the percentage drop in quantity sold is larger than the percentage rise in price, so total revenue (price × quantity) falls. If a product’s demand elasticity is greater than one, a 10 % price hike will reduce quantity demanded by more than 10 %, shrinking revenue. For example, a 20 % price increase on a toy that sells 1,000 units at $10 each would drop sales to 800 units; revenue falls from $10,000 to $8,000. Thus, for elastic goods, higher prices always lower total revenue.
Detailed Explanation
When demand is elastic, a price rise makes buyers cut back a lot more than the price goes up. Other options are incorrect because The mistake is thinking that a higher price always brings more money.
Key Concepts
Price Elasticity of Demand
Total Revenue
Elastic vs. Inelastic Demand
Topic
Price Elasticity of Demand
Difficulty
easy level question
Cognitive Level
understand
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