Demand for a good is unit elastic.When price rises by 5 percent,total revenue
A)increases by 5 percent.
B)decreases by 5 percent.
C)does not change.
D)increases by more than 5 percent.
E)decreases by more than 5 percent.

Question

Quizplus · Accepted Answer

When demand for a good is unit elastic, the percentage change in the quantity demanded is equal to the percentage change in price. Therefore, the increase in price by 5% will lead to a decrease in quantity demanded by 5%. As a result, the total revenue will remain unchanged because the decrease in quantity sold cancels out the increase in price.

Demand for a Good Is Unit Elastic