An increase in price causes an increase in total revenue when
A) demand is elastic.
B) demand is inelastic.
C) demand is unit elastic.
D) All of the above are possible.

Question

Quizplus · Accepted Answer

When demand is inelastic, a price increase leads to a proportionally smaller decrease in quantity demanded. Therefore, the total revenue increases. In the case of elastic demand, a price increase leads to a proportionally larger decrease in quantity demanded, resulting in a decrease in total revenue. In the case of unit elastic demand, a price increase leads to an equal proportionate change in quantity demanded, resulting in no change in total revenue. So, option B is the correct answer.

An Increase in Price Causes an Increase in Total Revenue