According to the total revenue rule, what happens when you raise the price on a good with inelastic demand?

Choose 1 answer:
(A) Total revenue falls to zero.
(B) Total revenue increases.
(c) Total revenue doesn't change.

D Consumer spending on the good stays the same
(E) Total revenue decreases.

Question

According to the total revenue rule, what happens when you raise the price on a good with inelastic demand?

Choose 1 answer:
(A) Total revenue falls to zero.
(B) Total revenue increases.
(c) Total revenue doesn't change.

D Consumer spending on the good stays the same
(E) Total revenue decreases.

Accepted Answer

∻Solution∻ ‖ a ⋮ Total Revenue Rule: The total revenue rule states that for a good with inelastic demand, an increase in price leads to an increase in total revenue. ‖ ∻Answer∻ ⚹ (B) Total revenue increases. ⚹ ∻Key Concept∻ ⚹ Inelastic Demand ⚹ ∻Explanation∻ ⚹ When demand is inelastic, consumers are less sensitive to price changes. Therefore, increasing the price of the good will lead to a proportionally smaller decrease in quantity demanded, resulting in higher total revenue. ⚹◊How does the elasticity of demand affect the total revenue when price is raised according to the total revenue rule?⍭ Generate me a similar question◊

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