Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 5 - Elasticity and Its Application - Questions For Review - Page 108: 5

Answer

If demand is price elastic as price rises Total Revenue falls. Quantity demanded percentage falls greater than percent increase of price therefore total revenue falls.

Work Step by Step

Understand that elastic demand has inverse relationship between price and Total Revenue and Inelastic Demand has positive relationship between price and Total Revenue.
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