If demand is relatively price inelastic:
A)a 1 percent increase in price evokes a less than 1 percent decrease in quantity demanded.
B)a 1 percent increase in price evokes a larger than 1 percent decrease in quantity demanded.
C)a 1 percent decrease in price evokes a larger than 1 percent increase in quantity demanded.
D)a 1 percent decrease or increase in price induces no change in total revenue.
E)none of the above.

Question

Quizplus · Accepted Answer

If demand is relatively price inelastic, it means that the change in quantity demanded is less than proportionate to the change in price. Therefore, a 1 percent increase in price will evoke a less than 1 percent decrease in quantity demanded, and vice versa. This implies that the total revenue will increase when the price increases, as the decrease in quantity demanded is not enough to offset the increase in price.

If Demand Is Relatively Price Inelastic