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30 August, 18:12

When demand is inelastic and price is decreased:

a. quantity demanded and total revenue fall to zero.

b. the effects of the decrease in price on total revenue and the corresponding increase in quantity demanded on total revenue perfectly offset one another; overall total revenue remains unchanged.

c. the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines.

d. the effect of the increase in quantity demanded on total revenue dominates the effect of the decrease in price on total revenue; overall total revenue increases.

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  1. 30 August, 20:03
    0
    The correct answer is letter "C": the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines.

    Explanation:

    Goods or services have inelastic demand when changes in prices do not affect their quantity demanded. If prices decrease or increase, the quantity demanded will remain at the same level or the change will be so minimal that it is not perceived. It is said then that the decrease in price dominates the effect of the changes in quantity demanded.

    However, if prices decrease and the quantity demanded remains the same, the company's overall revenue will decrease.
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