Price and total revenue are directly related when demand is
A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price elastic.

Question

Quizplus · Accepted Answer

When demand is price inelastic, it means that the quantity demanded changes by a smaller percentage than the percentage change in price. Therefore, when prices increase, total revenue also increases because the decrease in quantity demanded is not enough to offset the increase in price. Conversely, when prices decrease, total revenue decreases because the increase in quantity demanded is not enough to offset the decrease in price. This direct relationship between price and total revenue is characteristic of price inelastic demand.

Price and Total Revenue Are Directly Related When Demand Is