Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total revenue increases if demand is elastic
B
Total revenue decreases if demand is elastic
C
Total revenue remains unchanged regardless of elasticity
D
Total revenue increases if demand is inelastic
Understanding the Answer
Let's break down why this is correct
Answer
Demand elasticity measures how much the quantity demanded of a product changes when its price changes. If demand is elastic, a small increase in price will lead to a large decrease in the quantity sold, resulting in lower total revenue. For example, if a popular snack increases in price from $1 to $1. 50, and many customers stop buying it, the total money made from sales could drop. On the other hand, if demand is inelastic, the same price increase might not change the quantity sold much, so total revenue could actually increase.
Detailed Explanation
When demand is elastic, people buy less if the price goes up. Other options are incorrect because Some might think that raising prices always brings in more money; It's a common mistake to think that total revenue stays the same.
Key Concepts
demand elasticity
total revenue test
Topic
Total Revenue and Demand Elasticity
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.