Answer to Question #15751 in Microeconomics for amanda

Question

Elasticity and revenue. For each of the scenarios, will total revenue rise, fall or stay the same?
a. If demand is relatively elastic and price falls.
b. If demand is relatively inelastic and price rises.
c. If demand is unit elastic and price falls.

Answer 1

a) Revenue falls, because more obviously that prices will fall faster than quantity growth
b) Revenue will increase because prices rise and quantity is constant
c) Revenue will stay on the same level because prices fall with the same speed as quantity rise.