When price elasticity of demand is equal to unity, a small decrease in price: increases total...

When price elasticity of demand is equal to unity, a small decrease in price:

increases total revenue.

decreases total revenue.

has no effect on revenues.

raises marginal revenue.

Expert Solution

Option C.

The price elasticity of demand measures the change in quantity demanded in accordance with the changes in the price of a good.
When price elasticity of demand is unity, there will an equal change in quantity demanded when the price changes.
Hence when the P.E.D is unity, a small decrease in price will increase the quantity demanded but the total revenue will not change.

Rahul Sunny answered 3 years ago

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