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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Identify what happens to total revenue as a result of each of the following:

  1. a. Price rises and demand is elastic.
  2. b. Price falls and demand is inelastic.
  3. c. Price rises and demand is unit elastic.
  4. d. Price rises and demand is inelastic.
  5. e. Price falls and demand is elastic.

To determine

Identify the change in total revenue in different circumstances.

Explanation

Option a:

An elastic demand will inversely change as per the changes in price. Thus, if the demand is elastic, a rise in price causes to decline the demand of a commodity. As a result, the total revenue will fall.

Option b:

If a commodity has inelastic demand, then it does not increase or decrease, respectively with the fall or rise in its price.  Thus, if the demand is inelastic, a fall in price does not affect the demand of a commodity. As a result, the total revenue will fall.

Option c:

The unit elastic demand is the situation in which the percentage change in price is the same as the change in quantity demanded...

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