Answer to Question #223689 in Microeconomics for Ayush

Question

Air conditioners (AC's) follow the law of demand. If price of AC's fall, what happens to total revenue from sales of AC's?

Answer 1

The total revenue will decrease. This is based on the law of demand which considers the decrease in price brought about by decrease in demand. When customers are no longer interested in respective product the sellers end up selling the commodity at a low price, to eliminate the product from the stock. Therefore, due to the price and demand effect, the total revenue will therefore decrease.