Q. suppose the price of goods increases and total revenue received by the seller declines whether the demands for this goods on the demand curve is elastic or inelastic analyze with the help of schedule and graph?
Q. suppose the price of goods increases and total revenue received by the seller declines whether the demands for this goods on the
To answer the question , we need to know the definition of price elasticity of demand . It is the responsiveness of quantity demanded of a good to a change in its price, other things remaining the same .
We know that total revenue T R = P * Q ,
where P : Price of the good
Q : Quantity sold
In the question , we are given that the Price of the good ( P ) increases , but the Total Revenue ( T R ) received by the seller declines . This can happen only if the quantity sold by the seller falls.
The quantity sold falls means the quantity demanded has fallen due to a price rise . This can happen only if the demand for the product is elastic.
Demand for a product is elastic if a change in price of the product can significantly affect the demand for the product .
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