If the Demand for a Good Is Elastic, Then Total

question 31

Multiple Choice

If the demand for a good is elastic, then total revenue

• A) increases as price increases.
• B) remains constant as quantity demanded increases.
• C) increases as price decreases.
• D) decreases as quantity demanded increases.
• E) decreases as price decreases.

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Definitions:

Transfer Price

The price at which goods and services are sold between divisions within the same company or among affiliated companies.

Contribution Margin

The amount by which a product's sales revenue exceeds its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Production Capacity

The maximum amount of goods or services that can be produced in a given period under normal working conditions.

Lost Contribution Margin

The amount of contribution margin that is not realized due to not selling a product or service, often calculated as the sales price minus variable costs for the unsold units.