Higher prices will increase total revenue if
A)Demand is elastic.
B)Demand is unitary elastic.
C)Demand is inelastic.
D)The price elasticity of demand is zero.

Question

Quizplus · Accepted Answer

When demand is inelastic, a price increase will result in a relatively small decrease in quantity demanded. As a result, total revenue (price x quantity) will increase with a price increase. In contrast, when demand is elastic, a price increase will result in a relatively large decrease in quantity demanded, leading to a decrease in total revenue. When demand is unitary elastic or the price elasticity of demand is zero, total revenue is not affected by price changes.

Higher Prices Will Increase Total Revenue If