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If the total revenue from selling good X falls as a result of an increase in...

If the total revenue from selling good X falls as a result of an increase in the price of X, then we know that the price elasticity of demand for good X is:

inelastic

equal to 1

elastic

unitary

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Answer #1

As we know, when the demand for good is elastic, it implies that the total revenue and the price will move in the opposite direction, therefore, in this case, when total revenue from selling good X falls as a result of an increase in the price of X, then we know that the price elasticity of demand for good X is elastic. Also, when the demand is elastic it implies that the percentage change in the quantity demanded will be greater than the percentage change in price and this is the reason why total revenue and price will move in the opposite direction.

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