   Chapter 19, Problem 5QP

Chapter
Section
Textbook Problem

For each of the following, identify whether total revenue rises, falls, or remains constant: a. Demand is inelastic and price falls. b. Demand is elastic and price rises. c. Demand is unit elastic and price rises. d. Demand is inelastic and price rises. e. Demand is elastic and price falls.

To determine

Identify whether the total revenue rises, falls, or remains constant.

Explanation

Option a:

If a commodity has inelastic demand, then the price and total revenue are directly related. Therefore, a fall in price with inelastic demand will result in a fall in the total revenue.

Option b:

If a commodity has elastic demand, then the price and total revenue are inversely related. Therefore, a rise in price with elastic demand will result in a fall in the total revenue.

Option c:

If a commodity has unit elastic, then the total revenue will be independent of price elastic demand, and the price and total revenue are inversely related...

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