Questions: When the demand is elastic, an increase in the price will: decrease the revenue increase the revenue

When the demand is elastic, an increase in the price will: decrease the revenue increase the revenue
Transcript text: When the demand is elastic, an increase in the price will: decrease the revenue increase the revenue
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Solution

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The answer is the first one: decrease the revenue.

Explanation:

  1. Elastic Demand: When demand is elastic, it means that consumers are highly responsive to changes in price. A small increase in price leads to a relatively larger decrease in the quantity demanded.

  2. Revenue Calculation: Revenue is calculated as the product of price and quantity sold (Revenue = Price × Quantity).

  3. Effect of Price Increase: In the case of elastic demand, if the price increases, the quantity demanded decreases significantly. The decrease in quantity demanded is proportionally larger than the increase in price, leading to a reduction in overall revenue.

Therefore, when the demand is elastic, an increase in the price will decrease the revenue.

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