Suppose that the elasticity of demand for a product is 2.0. What will happen to total revenue as a firm increases the price?
A) Total revenue will increase.
B) Total revenue will decrease.
C) Total revenue will stay the same.
D) It cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

When the elasticity of demand is greater than 1, as in this case where it is 2.0, an increase in price will lead to a greater decrease in quantity demanded, resulting in a decrease in total revenue. Therefore, Option B is the correct answer.

Suppose That the Elasticity of Demand for a Product Is