Asked by Niketa Kurjee on Jun 03, 2024
Verified
Refer to Figure 5-4. If rectangle D is larger than rectangle A, then which of the following is not correct?
A) Demand is elastic between prices P1 and P2.
B) A decrease in price from P2 to P1 will cause an increase in total revenue.
C) The magnitude of the percentage change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.
D) An increase in price from P1 to P2 will cause an increase in total revenue.
Elastic Demand
A situation in which the demand for a product is sensitive to price changes, meaning a small change in price leads to a larger change in quantity demanded.
- Uncover the association between price elasticity and total earnings.
- Evaluate graphical portrayals of shifts in demand and elasticity adjustments.
Verified Answer
RS
Rahma SherifJun 09, 2024
Final Answer :
D
Explanation :
When demand is elastic, an increase in price leads to a decrease in total revenue because the percentage decrease in quantity demanded is greater than the percentage increase in price. Thus, statement D, which suggests an increase in price would increase total revenue in this context, is not correct.
Learning Objectives
- Uncover the association between price elasticity and total earnings.
- Evaluate graphical portrayals of shifts in demand and elasticity adjustments.