If the price elasticity of demand for a product equals 1, as its price rises the: a. total revenue increases.
b. quantity demanded increases.
c. total revenue does not change.
d. quantity demanded does not change.
e. total revenue decreases.

If the price elasticity of demand for a product equals 1, as its price rises the: b. quantity demanded increases.

The Elasticity of Demand occurs when the change in quantity demanded is large due to a change in price. The elasticity of demand can be computed using this formula: :

(Q1 – Q2) / (Q1 + Q2)

(P1 – P2) / (P1 + P2)

If the absolute value is equal to one, it means that the elasticity of demand is unitary. This then means that the quantity demanded will change at the same rate as the price.

Therefore, if the price elasticity of demand for a product equals 1, as its price rises the quantity demanded increases.

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c. total revenue does not change.

Explanation:

A price elasticity of demand can be defined as a measure of the responsiveness of the quantity of a product demanded with respect to a change in price of the product, all things being equal.

Mathematically, the price elasticity of demand is given by the formula;

The demand for goods is said to be elastic, when the quantity of goods demanded by consumers with respect to change in price is very large. Thus, the more easily a consumer can switch to a substitute product in relation to change in price, the greater the elasticity of demand.

Generally, consumers would like to be buy a product as its price falls or become inexpensive.

For substitute products (goods), the price elasticity of demand is always positive because the demand of a product increases when the price of its close substitute (alternative) increases.

If the price elasticity of demand for a product equals 1, as its price rises the total revenue does not change because the demand is unit elastic.

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