Suppose That the Price of a Good Is $10 and Quantity

question 138

Multiple Choice

Suppose that the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What happened to total revenue and what does this indicate?

• A) Total revenue decreased from $500 to $480, indicating that demand is inelastic.
• B) Total revenue decreased from $500 to $480, indicating that demand is elastic.
• C) Total revenue increased from $480 to $500, indicating that demand is inelastic.
• D) Total revenue increased from $480 to $500, indicating that demand is elastic.

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Definitions:

Prepaid Subscriptions

Payments made in advance for subscription-based services, recognized as an asset until the service period has been fulfilled.

Calendar-Year

A one-year period that begins on January 1 and ends on December 31, used as the financial year by many countries and organizations.

Adjustment

A modification made to accounts or financial statements to correct them or to reflect changes in economic circumstances.

Unearned Subscription Revenue

Revenue received in advance for services or goods to be provided in the future, recognized as a liability until delivered.