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Total revenue goes up when price falls
Total revenue goes up when price falls. Match the concept and definition with the choices below.
A) When prices fall, people choose to buy more.
B) Substitution
C) Persons will buy more at every price.
D) When demand elasticity is "elastic" or something like -1.7
E) A strategy for increasing profit
F) Customer loyalty programs
Expert Solution
D. When demand elasticity is "elastic" or something like -1.7
Reason: When the demand of a good is relatively elastic in nature (i.e elasticity of the good > 1), total revenues tend to increase when the price of the good falls and decreases when the price of the good increases. This is because, in case of price elastic demand, the percentage increase or decrease in the quantity demanded of the good is greater than the percentage change in price. So even a lesser change in price will lead to a larger change in quantity demanded of the good.
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