Answer to Question #205841 in Macroeconomics for NOMBULELO MLOMO

Question

When the price of commodity B rises by 10%, the total revenue received by firms that sell commodity B rises by 5%. The demand for commodity B is therefore...

Answer 1

Given:

Price of the commodity B rises by 10%

Total revenue received by firms that sell commodity B rises by 5%

Demand =?

When the price of commodity B rises by 10%, the total revenue received by firms that sell commodity B rises by 5%. The demand for commodity B is, therefore... inelastic.

This is the scenario of the inelastic because a rise in price causes a rise in total revenue, resulting in the demand said to be inelastic as the rise in price does not have a large impact on the quantity demanded.