Answer to Question #279636 in Macroeconomics for minma

Question

1. When the value of a good’s price elasticity of demand is greater than 1,

(a) A reduction in price causes a reduction in total revenue.

(b) An increase in the price causes a decrease in total revenue.

(c) An increase in the price causes an increase in total revenue.

(d) An increase in price causes no change in total revenue.

(e) None of the above.

Answer 1

When the value of a good’s price elasticity of demand is greater than 1, an increase in the price causes a decrease in total revenue.

So, the correct answer is (b).