Discuss and Explain What Happens to Total Revenue When Price

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Examlex · Accepted Answer

The Answer is When the price rises and demand is price elastic, total revenue will decrease. This is because the increase in price will cause a larger decrease in quantity demanded, leading to a more than proportionate decrease in total revenue.

On the other hand, when the price rises and demand is price inelastic, total revenue will increase. This is because the increase in price will cause a smaller decrease in quantity demanded, leading to a less than proportionate decrease in total revenue.

When the price rises and demand is unit price elastic, total revenue will remain constant. This is because the increase in price will result in a proportionate decrease in quantity demanded, leading to no change in total revenue.

Now, when the price decreases and demand is price elastic, total revenue will increase. This is because the decrease in price will cause a larger increase in quantity demanded, leading to a more than proportionate increase in total revenue.

When the price decreases and demand is price inelastic, total revenue will decrease. This is because the decrease in price will cause a smaller increase in quantity demanded, leading to a less than proportionate increase in total revenue.

Finally, when the price decreases and demand is unit price elastic, total revenue will remain constant. This is because the decrease in price will result in a proportionate increase in quantity demanded, leading to no change in total revenue.

Discuss and Explain What Happens to Total Revenue When Price

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