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 inelastic
Understanding the Answer
Let's break down why this is correct
Answer
When the price of a product goes down and the total revenue goes up, it means that the demand for that product is elastic. This means that consumers are very responsive to changes in price; when the price drops, many more people decide to buy it. For example, think about a popular snack that costs $2. If the price is reduced to $1, more people might buy it, leading to an increase in total sales and revenue. This shows that the percentage increase in quantity sold is greater than the percentage decrease in price.
Detailed Explanation
When the price goes down and revenue goes up, people buy a lot more. Other options are incorrect because Some might think that inelastic means people still buy the same amount when prices change; Unitary elastic means that revenue stays the same when prices change.
Key Concepts
Total revenue
Topic
Understanding Elasticity and Revenue
Difficulty
easy level question
Cognitive Level
understand
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