If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Question

Quizplus · Accepted Answer

When price goes up and quantity demanded declines, the change in total revenue depends on the price elasticity of demand. If demand is relatively inelastic (less responsive to changes in price), total revenue will increase. In this scenario, the 10 percent decline in quantity demanded is outweighed by the 20 percent increase in price, resulting in a net increase in total revenue.

If Price Goes Up 20 Percent and Quantity Demanded Declines