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Homework answers / question archive / What would happen to total revenue of the firm if price increases in the inelastic region of the demand curve? Not enough information is provided Total revenue of the firm would stay the same Total revenue of the firm would decrease Total revenue of the firm would increase
What would happen to total revenue of the firm if price increases in the inelastic region of the demand curve? Not enough information is provided Total revenue of the firm would stay the same Total revenue of the firm would decrease Total revenue of the firm would increase
The answer is D.
Price elasticity of demand is the degree to which the demand for something changes as its price changes.
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
If the demand is inelastic then an increase in price will result in a relatively smaller decrease in quantity demanded. So, total revenue will increase with an increase in price level.
