If demand is unit price elastic, a change in price causes:
A) no change in total revenue.
B) a decrease in total revenue.
C) a change in total revenue in the opposite direction.
D) an increase in total revenue.

Question

Quizplus · Accepted Answer

When demand is unit price elastic, a change in price will result in an equal proportional change in quantity demanded, which leaves total revenue unchanged. This means that the increase in revenue per unit sold due to a higher price is offset by the decrease in the number of units sold. The same thing happens in the opposite direction, with a decrease in price causing an increase in quantity demanded that compensates for the lower revenue per unit. Thus, the total revenue remains the same.

If Demand Is Unit Price Elastic, a Change in Price