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 constant
D
Total revenue fluctuates unpredictably
Understanding the Answer
Let's break down why this is correct
Answer
When demand is elastic, it means that consumers are very responsive to changes in price. If the price of a product decreases, more people are likely to buy it because it becomes more affordable. This increase in quantity sold usually leads to a rise in total revenue, which is the total amount of money a company makes from selling its products. For example, if a store sells sneakers for $100 and reduces the price to $80, and as a result, sells twice as many pairs, the total revenue will increase even though the price per pair is lower. So, with elastic demand, a decrease in price can lead to a larger increase in the number of items sold, boosting total revenue overall.
Detailed Explanation
When demand is elastic, people buy much more if the price goes down. Other options are incorrect because Some might think lowering the price always means less money; It's a common mistake to think revenue stays the same.
Key Concepts
relationship between price and total revenue
revenue maximization strategies.
Topic
Total Revenue and Demand Elasticity
Difficulty
medium level question
Cognitive Level
understand
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