if demand is price inelastic ?
Correct answer: C. An increase in price increase revenue
- A. An increase in price must raise profits
- B. An increase in price decrease revenue
- C. An increase in price increase revenue
- D. A decrease in price reduces sales
Explanation
When demand is price inelastic, the percentage fall in quantity demanded is smaller than the percentage rise in price. Therefore, a price increase raises total revenue, although it does not necessarily raise profit.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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