When demand is elastic in the current price range:
A)an increase in price will increase total revenue because the decrease in quantity demanded is less than the increase in price
B)an increase in price will decrease total revenue because the decrease in quantity demanded is greater than the increase in price
C)a decrease in price will decrease total revenue because the increase in quantity demanded is smaller than the decrease in price
D)a decrease in price will not affect the total revenue

Question

Quizplus · Accepted Answer

When demand is elastic, a decrease in price will lead to a larger increase in the quantity demanded, while an increase in price will lead to a larger decrease in the quantity demanded. Therefore, if a firm increases its price, its revenue will decrease because the decrease in quantity demanded will be greater than the increase in price. Conversely, if a firm lowers its price, its revenue will increase because the increase in quantity demanded will be greater than the decrease in price.

When Demand Is Elastic in the Current Price Range