Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will
A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question

Refer to the information provided in Figure 5.4 below to answer the questions that follow.  Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will
A) increase. 
B) decrease. 
C) remain constant. 
D) either increase or decrease.

Quizplus · Accepted Answer

Unit elastic demand means that a change in price results in an equal proportionate change in quantity demanded, thus leading to no change in total revenue. Therefore, if the store reduces the price of a milkshake from P3 to P4, it will result in a decrease in total revenue.

Refer to the Information Provided in Figure 5