Question

1. Fill in the blanks:
1. When demand is inelastic, a decrease in price causes quantity demanded to ________and total revenue to ________.
2. If price rises and total revenue rises, demand must be ________.
3. When demand is elastic, an increase in price causes quantity demanded to ________and total revenue to ________.
4. If price rises and total revenue stays the same, demand must be ________ elastic.

Answer 1

• a) when demand is in elastic, a decrease in price causes quantity demanded to increase and total revenue to fall.
• A fall in price causes the quantity demanded to increase and total revenue to fall.
• b) If price rises and total revenue rises, demand must be inelastic.
• If there is an increase in price, the total revenue rises which causes demand to be inelastic.

c) when demand is elastic, an increase in price causes quantity demanded to decrease and total revenue to fall.

If demand is elastic, an increase in price causes quantity demanded to decrease and total revenue to fall.

d) If price rises and total revenue stays the same, demand must be unitary elastic.

• If a demand for a good is unitary elastic, the change in the price of that good causes an equal change in quantity demanded.