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 becomes zero
Understanding the Answer
Let's break down why this is correct
Answer
When demand is inelastic, it means that consumers will continue to buy nearly the same amount of a product even if the price increases. Because of this, when a business raises its prices, total revenue, which is the total amount of money made from sales, actually goes up. For example, if a company sells a medicine that people need, and they raise the price from $10 to $12, most customers will still buy it because they need it. Since the quantity sold does not drop much, the extra money made from the higher price means total revenue increases. In summary, with inelastic demand, higher prices lead to higher total revenue because the decrease in quantity sold is small compared to the increase in price.
Detailed Explanation
When demand is inelastic, people still buy the product even if the price goes up. Other options are incorrect because Some might think that higher prices always mean fewer sales; It's a common mistake to think that price changes don't affect revenue.
Key Concepts
Total Revenue
Demand Elasticity
Consumer Behavior
Topic
Total Revenue and Demand Elasticity
Difficulty
easy level question
Cognitive Level
understand
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