Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It is elastic
B
It is inelastic
C
It is unitary elastic
D
It is perfectly elastic
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a product decreases and total revenue increases, it suggests that the demand for that product is elastic. This means that consumers are very responsive to changes in price. In simple terms, when the price goes down, many more people are willing to buy the product, which leads to a larger total revenue. For example, if the price of a popular snack drops from $2 to $1, more customers might buy it, resulting in higher overall sales and revenue, even though each unit is sold for less. This behavior shows that a small change in price can lead to a big change in the quantity sold, indicating elastic demand.
Detailed Explanation
When the price goes down and people buy more, it shows that demand is elastic. Other options are incorrect because Some might think inelastic means people always buy the same amount; Unitary elastic means revenue stays the same when price changes.
Key Concepts
price elasticity of demand
total revenue test
consumer behavior
Topic
Total Revenue and Demand Elasticity
Difficulty
hard level question
Cognitive Level
understand
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