Introduction to Economics 1 Deneme Sınavı Sorusu #753447
I. If the demand is inelastic, the total revenue increases as a result of a rise in the price of the good.
II. The total revenue decreases along with the price of the good if the demand is elastic.
III. Price elasticity of demand is a variable factor that determines whether the total revenue will fall or not.
Which of the statements above is true according to the relationship between the total revenue and price elasticity of demand?
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Only I |
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Only II |
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I and II |
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I and III |
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II and III |
If the demand is elastic, an increase in the price causes the total revenue to decrease. A decrease in price, in contrast, causes total revenue to increase. On the other side, when the demand is inelastic, an increase in price causes the total revenue to increase and vice versa. The correct answer is D.
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