Holding all other forces constant,if decreasing the price of a good leads to an increase in total revenue,then the demand for the good must be
A)unit elastic.
B)inelastic.
C)elastic.
D)None of the above is correct because a price decrease never leads to an increase in total revenue.

Question

Quizplus · Accepted Answer

If a decrease in price leads to an increase in total revenue, it means that the percentage increase in quantity demanded is greater than the percentage decrease in price, indicating that demand is elastic. Inelastic demand would mean that a decrease in price would not result in a significant increase in quantity demanded and may even lead to a decrease in total revenue. Unit elastic demand would mean that the percentage increase in quantity demanded is exactly equal to the percentage decrease in price, resulting in no change in total revenue.

Holding All Other Forces Constant,if Decreasing the Price of a Good