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 consumers are very responsive to changes in price; when the price goes down, they buy a lot more of it. For example, if a popular brand of sneakers lowers its price from $100 to $80, many more people might decide to buy them, leading to a big increase in sales. Since the total revenue, which is the money made from sales, goes up even with a lower price, it indicates that the percentage increase in quantity sold is greater than the percentage decrease in price. In summary, this situation tells us that lowering the price encourages more people to buy, highlighting the elastic nature of demand for that product.
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 always 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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