Answer to Question #220589 in Economics for Beauty Magadlela

Question

Which one of the following statements is true with regards to price elasticity and total revenue.

A. If demand is inelastic an increase in price will increase total revenue and a decrease in price will also increase total revenue.
B. If demand is inelastic an increase in price will decrease total revenue and a decrease in price will also decrease total revenue.
C. If demand is inelastic an increase in the price will increase total revenue while a decrease in price will decrease total revenue.
D. If demand is inelastic an increase in price will increase total revenue while a decrease in price will decrease total revenue.

Answer 1

If demand is inelastic an increase in the price will increase total revenue while a decrease in price will decrease total revenue, because the change in quantity demanded will be lower than the change in price.

So, the correct answer is C.