You Are Reading the Quarterly Financial Report of One of Your

question 212

Multiple Choice

You are reading the quarterly financial report of one of your competitors. You expected to see their total sales revenue decline because they had a large price increase during the quarter. You were certain that the price increase would lead to an equivalently large decrease in their total sales revenue. To your surprise, their total sales revenue actually increased in the quarter. Based on this information, which of the following explanations could explain why the competitor's total sales revenue increased?

• A) The demand for the company's products is inelastic, so total revenue declines when prices are raised.
• B) The demand for the company's products is elastic, so total revenue declines when prices are raised.
• C) The demand for the company's products is elastic, so unit sales increase when prices are raised.
• D) The demand for the company's products is inelastic, so total sales revenue increases when prices are raised.
• E) The demand for the company's products is elastic, so fixed costs increase when prices are raised.

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