Question

If demand for a good is extremely elastic, raising the price of that good typically has what effect on total revenue?.

Answer 1

If demand for a good is extremely elastic, raising the price of that good typically has what effect on total revenue---  decreases

If demand is elastic at a given price level, then should a company cut its price, the percentage drop in price will result in an even larger percentage increase in the quantity sold—thus raising total revenue. However, if demand is inelastic at the original quantity level, then should the company raise its prices, the percentage increase in price will result in a smaller percentage decrease in the quantity sold—and total revenue will rise.

Demand elasticity :

Demand elasticity is the change in quantity demanded per change in a demand determinant. Although there are several demand determinants, such as consumer preferences, the main determinant with which demand elasticity is measured is the change in price. Businesses are particularly interested in price elasticity, since it measures by how much total revenue changes with the price.

Learn more about demand elasticity :

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