Which of the following is a possible change in total revenue that occurs if you increase the price of a good with unit elasticity?

Choose 1 answer:
(A) $10 \%$
(B) $1 \%$
(c) $0 \%$
(D) $-1 \%$
(E) $5 \%$

Question

Which of the following is a possible change in total revenue that occurs if you increase the price of a good with unit elasticity?

Choose 1 answer:
(A) $10 \%$
(B) $1 \%$
(c) $0 \%$
(D) $-1 \%$
(E) $5 \%$

Accepted Answer

∻Solution∻ ‖ a ⋮ Price Elasticity of Demand: The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. ‖ ‖ b ⋮ Unit Elasticity: When a good has unit (or unitary) elasticity, the price elasticity of demand is equal to 1. This means that the percentage change in quantity demanded is equal to the percentage change in price. ‖ ‖ c ⋮ Total Revenue and Unit Elasticity: Total revenue is the product of price and quantity sold. For a good with unit elasticity, an increase in price does not change total revenue because the percentage increase in price is exactly offset by an equal percentage decrease in quantity demanded. ‖ ∻Answer∻ ⚹ (C) $0 \%$ ⚹ ∻Key Concept∻ ⚹ Unit Price Elasticity of Demand ⚹ ∻Explanation∻ ⚹ When the price of a good with unit elasticity is increased, the total revenue remains unchanged because the increase in price is exactly offset by a proportional decrease in quantity demanded. ⚹◊What is the formula for calculating total revenue in economics?⍭ Generate me a similar question◊

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