If Total Revenue Goes Down When Price Falls, the Price

question 16

Multiple Choice

If total revenue goes down when price falls, the price elasticity of demand is said to be:

• A) price inelastic.
• B) unit price elastic.
• C) price elastic.
• D) positive.

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Definitions:

Backward-Bending

A term often used in labor economics to describe the supply curve of labor, which can bend backwards at higher wage levels, indicating that higher wages can lead to a decrease in labor supply.

Substitution Effect

The economic principle that as the price of a good or service rises (or incomes decrease), consumers will replace pricier items with less costly alternatives, holding the utility derived from consumption constant.

Price Decreases

Price decreases occur when the cost of goods or services goes down, often due to factors like increased competition, lower demand, or decreases in production costs.

Income Effect

The effect of changes in either individual or economic income on the demand levels for goods or services.