tb mc qu. 06 - 155 in which of the following... in which of the following instances will total revenues…
tb mc qu. 06 - 155 in which of the following... in which of the following instances will total revenues increase? multiple choice price falls and ed equals 0.27 price rises and ed equals 0.61 price falls and demand is of unit elasticity price rises and ed equals 1.69
Answer
Brief Explanations:
The relationship between price - change, price elasticity of demand (Ed) and total revenue is as follows: When demand is inelastic (Ed < 1), an increase in price leads to an increase in total revenue, and a decrease in price leads to a decrease in total revenue. When demand is elastic (Ed>1), an increase in price leads to a decrease in total revenue, and a decrease in price leads to an increase in total revenue. When demand is unit - elastic (Ed = 1), a change in price does not affect total revenue. In the first option, Ed = 0.27 (inelastic), a price fall will decrease total revenue. In the second option, Ed=0.61 (inelastic), a price rise will increase total revenue. In the third option, with unit - elastic demand, a price fall does not change total revenue. In the fourth option, Ed = 1.69 (elastic), a price rise will decrease total revenue.
Answer:
price rises and Ed equals 0.61