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4 September, 09:11

Which of the following statements is true? Total revenue will equal zero when the demand for a product is unit elastic. When a firm lowers its price its total revenue may either increase or decrease. Whenever a firm raises its price its total revenue will increase. Whenever a firm increases its quantity sold its revenue will increase.

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  1. 4 September, 10:52
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    Total revenue will equal zero when the demand for a product is unit elastic. FALSE

    When a firm lowers its price its total revenue may either increase or decrease. TRUE

    Whenever a firm raises its price its total revenue will increase. FALSE

    Whenever a firm increases its quantity sold its revenue will increase. FALSE

    Explanation:

    Price elasticity en the demand measures the porcentage of change in the quantity demandend when a price is changed.

    When the porcentage of change in the quantity demanded is the same of the porcentage of change in the price we talk of unit elastic. The revenues will keep being the same no matter the change in the price.

    When a firm lower the price of a good it can increase the revenues if the product has an elastic demand, it means that the porcentage of change in the quantity demanded is bigger than the porcentage in the change of the price, and if the product has an inelastic demand, the revenues will decrease. Price demand is inelastic when the porcentage of change in the quantity demanded is smaller than the porcentage in the change of the price.
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