Question

Which of the following statements is true? If the price of a good is lowered and total revenue decreases, demand is elastic. If the price of a good is raised and total revenue does not change, demand is perfectly elastic. If the price of a good is lowered and total revenue increases, demand is inelastic. If the price of a good is raised and total revenue increases, demand is inelastic.

Answer 1

Answer 1:

Option D. If demand and total revenue moves in the same direction, then demand of the good is inelastic and when they move in opposite directions, then demand of the good is elastic. Thus, option d which states that if the price of the good is raised and total revenue increases, then demand is inelastic is true statement.

Answer 2;

Option D. Perfectly inelastic demand curve is represented by the vertical line and relatively inelastic demand curve is represented by the demand curve which is downward sloping.

Answer 3:

Option B. Demand is more elastic in the long run than in the short run because people can change their tastes and preferences in the long run as compared to in the short run.

Answer 4:

Option A. When there are few close substitutes available for the product in the market, then the demand tends to be relatively inelastic.