True or false? If the price elasticity is zero, then any price change will also have zero effect on total revenue

Economics Jan 19, 2021

True or false? If the price elasticity is zero, then any price change will also have zero effect on total revenue.

Expert Solution

The given statement is False.

If the price elasticity of demand is zero, the demand will not change at any level of price. The change in price will have a direct bearing on the total revenues. A 10% increase in price will increase the total revenues by 10% because demand will not fall and an increase in prices will have a direct impact on total revenues.

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