What happens to total revenue when the price elasticity of demand equals one and the price decreases?

Multiple choice question for Supply and Demand. Select an option, then review the explanation below.

Explanation

When demand is unit elastic (elasticity equals one), a reduction in price does not change the total revenue; it stays constant because the percentage change in quantity demanded exactly offsets the price change.

Practice related questions from the same subject.

1.What is the typical shape of a demand curve?
2.What term describes a company earning profits beyond its normal profit level?
3.How does an increase in marginal cost affect output, and how does an increase in marginal revenue impact output?
4.Marginal revenue refers to the ________ resulting from producing an additional ________ of output.
5.What are firms generally assumed to do with their costs and profits?

What happens to total revenue when the price elasticity of demand equals one and the price decreases?

Explanation

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