Under what conditions will an increase in the price of a product lead to a reduction in total spending for that product?

Economics Dec 17, 2020

Expert Solution

If the demand of a product is almost perfectly elastic or is approaching perfect elasticity, an increase in the price of the product will lead to a reduction in the total spending for that product. An almost perfectly horizontal demand curve is where this is guaranteed to occur.

The total spending on the product is equal to the total revenue of the product, which is price multiplied by quantity.

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