Question

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is Group of answer choices perfectly elastic. perfectly inelastic. relatively elastic. relatively inelastic.

Answer 1

Answer: relatively elastic.

Explanation:

Elasticity is the measure of the responsiveness that a product's quantity demanded has to a change in its price. In other words, if the quantity demanded changes as a result of a change in price, the good is elastic.

In this scenario, the total revenue fell when they increased price. This means that people bought less of the firm's goods which means therefore that the good is relatively elastic because the quantity demanded was affected by a change in price.