Asked by Diana Eynullaeva on May 11, 2024
Verified
If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price
A) increase will decrease total revenue in the short run but increase total revenue in the long run.
B) increase will increase total revenue in the short run but decrease total revenue in the long run.
C) decrease will increase total revenue in the short run but decrease total revenue in the long run.
D) decrease will decrease total revenue in the short run and decrease total revenue in the long run.
Demand Elastic
Describes how sensitive the quantity demanded of a product is to a change in its price.
Total Revenue
The overall amount of money generated by a firm from its sales activities before any costs or expenses are deducted.
- Explore the effects of price transformations on aggregate revenue under assorted elasticity conditions.
- Recognize the difference in elasticity between short-run and long-run demand.
Verified Answer
AT
App's TutorialMay 14, 2024
Final Answer :
B
Explanation :
When demand is inelastic, a price increase leads to a smaller percentage decrease in quantity demanded, thus increasing total revenue. Over the long run, as demand becomes elastic, a price increase causes a larger percentage decrease in quantity demanded, reducing total revenue.
Learning Objectives
- Explore the effects of price transformations on aggregate revenue under assorted elasticity conditions.
- Recognize the difference in elasticity between short-run and long-run demand.