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Homework answers / question archive / Along a linear demand curve, total revenue is maximized A
Along a linear demand curve, total revenue is maximized
A. where the slope of a line from the origin to the demand curve is equal to the elasticity.
B. where the elasticity is -1.
C. near the quantity axis intercept.
D. near the price axis intercept.
E. where the elasticity is 0.t
The answer is B.
In a linear demand curve, total revenue is maximized where elasticity is less than one. When the demand curve is linear, it implies that the commodity has an inelastic demand. Elasticity measures the extent to which demand reacts to a price change. A product is said to be elastic if a change in price results in a change in demand.
On the other hand, a product is said to be inelastic if a price change does not affect the quantity ordered. Therefore, when elasticity is one, revenue can be maximized.
