contestada

How does total revenue change as one moves downward and to the right along a linear demand curve? Group of answer choices It first increases, then decreases. It is unaffected by a movement along the demand curve. It always decreases. It always increases.

Respuesta :

Answer:

It first increases, then decreases.

Explanation:

Price Elasticity of Demand (P.Ed) is responsive change in demand, due to change in price. Total Revenue is the total value of sale, Price x Quantity

Geometrically; P.Ed is measured at a point on linear demand curve, as: Segment below that point / Segment above that point

So, as we move downwards the demand curve, elasticity of demand falls.

  • Upper Segment of Demand Curve : Demand is more Elastic. So, price & total revenue are inversely related. Hence, Price Decrease as we move downwards on the demand curve, leads to increase in Total Revenue
  • Lower Segment of Demand Curve : Demand is less Elastic. So, price & total revenue are directly related. Hence, Price Decrease as we move downwards on the demand curve, leads to decrease in Total Revenue

Otras preguntas