Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The demand is elastic
B
The demand is inelastic
C
The demand is unitary elastic
D
The demand 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 shows that the demand for that product is elastic. This means that customers are very responsive to changes in price; when the price goes down, many more people want to buy it. For example, if a popular toy drops from $20 to $10, and the store sells twice as many toys at the lower price, the total revenue increases. In this case, the increase in quantity sold more than offsets the lower price, leading to higher total revenue. Therefore, we can conclude that the demand for this product is elastic because the price change significantly affected how much people bought.
Detailed Explanation
When the price goes down and people buy much more, demand is elastic. Other options are incorrect because Some might think that inelastic means people still buy the same amount; Unitary elastic means total revenue stays the same when price changes.
Key Concepts
price elasticity of demand
Topic
Total Revenue and Demand Elasticity
Difficulty
easy level question
Cognitive Level
understand
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