Question

If demand is __________, the fall in revenue from lower quantity demanded is greater than the increase in revenue from higher price, so total revenue ________.

1) elastic, falls
2) inelastic, rises
3) elastic, rises
4) inelastic, falls

Answer 1

If demand is inelastic, the fall in revenue from lower quantity demanded is greater than the increase in revenue from higher price, so total revenue rises . option 2 is answer

Step-by-step explanation:

If demand is elastic, the fall in revenue from a lower quantity demanded is greater than the increase in revenue from a higher price, so total revenue falls. Therefore, the correct answer is 1) elastic, falls. This is because when demand is elastic, consumers are very responsive to price changes,

meaning a small increase in price will cause a large decrease in the quantity demanded. Conversely, if demand is inelastic, a price increase will not significantly reduce the quantity demanded, so total revenue increases.

At that original quantity level, then the band should raise the ticket price, because a certain percentage increase in price will result in a smaller percentage decrease in the quantity sold-and total revenue will rise.

If demand has a unitary elasticity at that quantity, then an equal percentage change in quantity will offset a moderate percentage change in the price-so the band will earn the same revenue whether it (moderately) increases or decreases the ticket price. option 2 is answer