How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? LO6.2 Price falls and demand is inelastic. Price rises and demand is elastic. Price rises and supply is elastic. Price rises and supply is inelastic. Price rises and demand is inelastic. Price falls and demand is elastic. Price falls and demand is of unit-elasticity.

Price falls and demand is inelastic.

Decrease as the amount demanded will be the same but the revenue fro mthis quantity will be lower.

Price rises and demand is inelastic.

Increase as the quantity demanded will be the same but at a higher price per unit.

Price rises and demand is elastic.

Decrease as the decrease in demand will negate the price increase

Price falls and demand is elastic

Increase as the decrease in prince will make the quantity increase in a higher proportion than the decrease in sales, therefore make a higher revenue

Price falls and demand is of unit-elasticity.

unchanged as the price and quantity effect cancel each other.

Explanation:

Being total Revenue: Price Sales x Quantity

and being Quantity a function of Sales price

we can derivate that Total revenue :

P + f(P)

And end with the following expression:

Q(1 - Ed) = total revenue efffect

when the demadn is inelastic (<1) this will be positive thus, they move in the same directins.

While, if elastic then (>1) making the otal revenue negative they move in opposite direction

Last if equal to one then, the increase is zero, ther eis no change

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