If the price elasticity of demand is elastic, reduced demand for a good will create a greater fall in revenue than the increase in revenue created by the increase in price.

Question

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When the price elasticity of demand is elastic, the percentage change in quantity demanded will be larger than the percentage change in price. This means that reducing the price of a good will increase the quantity demanded by a larger percentage than increasing the price will decrease the quantity demanded. As a result, a reduction in demand will lead to a larger fall in revenue than the increase in revenue created by an increase in price.

If the Price Elasticity of Demand Is Elastic, Reduced Demand