Asked by Isaac Matsie on Jul 08, 2024
Verified
Suppose that an increase in the price of a good leads to an increase in total revenue.Ignoring other factors (like supply) ,at its current price the good must be:
A) price-inelastic.
B) price-elastic.
C) perfectly price-elastic.
D) inferior.
Total Revenue
The total amount of money a firm receives from sales of its products or services, calculated by multiplying the price per unit by the total number of units sold.
Price-inelastic
Price-inelastic describes a situation where the demand for a product or service is relatively unresponsive to changes in its price.
- Identify the link between demand's price elasticity and total income.
- Identify the financial consequences of price elasticity on enterprises and consumers.
Verified Answer
AH
Ashley HopkinsJul 14, 2024
Final Answer :
A
Explanation :
If an increase in price leads to an increase in total revenue, the demand for the good must be relatively inelastic. This means that consumers are not very sensitive to changes in price and are willing to pay the extra amount, resulting in higher revenue for the seller.
Learning Objectives
- Identify the link between demand's price elasticity and total income.
- Identify the financial consequences of price elasticity on enterprises and consumers.