Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The demand for the product is inelastic, indicating that consumers will purchase it regardless of price changes.
B
The product has many substitutes available, leading to a decrease in sales despite higher prices.
C
Consumers are unaware of the price change, resulting in unchanged purchasing behavior.
D
The overall market demand for the product has decreased, causing revenue to rise unexpectedly.
Understanding the Answer
Let's break down why this is correct
Answer
When a company raises the price of a product and sees an increase in total revenue, it usually means that the demand for that product is inelastic. This means that customers are not very sensitive to price changes; they will continue to buy the product even at a higher price. For example, if a popular brand of coffee raises its price slightly, but customers still buy it because they love the taste and can't find a similar product, the company will earn more money overall. Inelastic demand often happens with essential goods or strong brand loyalty, where people feel they need the product regardless of price. Therefore, the increase in total revenue indicates that the higher price did not significantly reduce the number of sales.
Detailed Explanation
When demand is inelastic, people buy the product even if the price goes up. Other options are incorrect because This option suggests that if there are many alternatives, people will stop buying the product; This choice implies that people don't notice price changes.
Key Concepts
Total Revenue
Demand Elasticity
Consumer Behavior
Topic
Total Revenue and Demand Elasticity
Difficulty
medium level question
Cognitive Level
understand
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