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27 January, 17:44

Total revenue decreases as the price of a good increases, if the demand for the good is rev: 05_14_2018

Multiple Choice

- unitary elastic.

- inelastic.

- elastic.

- perfectly elastic.

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Answers (2)
  1. 27 January, 19:35
    0
    Answer: Option (C) is correct.

    Explanation:

    Elastic demand means that percentage change in price lead to greater change in the quantity demanded.

    So, if the price of a good decreases then the consumers demand for a good increases and hence increase in the total revenue. On the other hand, if the price of a good increases then as a result demand for that commodity decreases and hence decrease in the total revenue.
  2. 27 January, 21:41
    0
    What unit elasticity means, therefor, is that any increase in the price causes a decrease in demand that keeps revenue the same. In a normal market a price which maximizes revenue must have this property, by definition, because if a higher price produces more revenue, we obviously have not maximized it
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