question archive If a firm decreases the price of a good and total revenue decreases, then A
If a firm decreases the price of a good and total revenue decreases, then A
Subject:EconomicsPrice:2.88 Bought3
If a firm decreases the price of a good and total revenue decreases, then
A. the demand for this good is price elastic.
B. the demand for this good is price inelastic.
C. the cross-price elasticity is negative.
D. the income elasticity is less than 1.
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The correct answer is Option B. the demand for this good is price inelastic.
Always remember that in the case of inelastic price demand for goods, a decrease of the latter may result in a less proportionate increase in the demand of goods. As a result total revenue decrease. In short, there is a direct relationship of price and revenue of an inelastic good. If the price decreases, revenue also decreases. If the price increases, revenue also increases.
