Introduction to Economics 1 Deneme Sınavı Sorusu #726091
Which of the following statements is true about the total revenue from sales in case of price changes of goods?
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If demand is elastic, an increase in price causes total revenue to increase. |
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If demand is elastic, a decrease in price, causes total revenue to decrease. |
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When demand is inelastic, an increase in price cause total revenue to decrease. |
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When demand is inelastic, an increase in price causes total revenue to stay the same. |
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If demand is elastic, an increase in price causes total revenue to decrease. |
The answer of this question is related to the price elasticity of demand. If demand is elastic, an increase in price causes total revenue to decrease. A decrease in price, in contrast, causes total revenue to increase. On the other hand, when demand is inelastic, an increase in price causes total revenue to increase. With an inelastic demand curve, the reason that total revenue increases with price increase since the increase in price leads to a decrease in quantity demanded that is proportionally smaller. The correct answer is E.
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