Question

pls carefully review

Choose the correct statement.

A. The change in total revenue that arises from a price change is independent of the price elasticity of demand.

B. A rise in price decreases total revenue.

C. A rise in price increases total revenue.

D. Total revenue from the sale of a good equals the price of the good multiplied by the quantity sold.

Answer 1

The correct statement is Option D - Total revenue from the sale of a good equals the price of the good multiplied by the quantity sold.

The term revenue refers to the firm’s income through the sale of the good at different price level. Total revenue or total sales can be obtained by multiplying the number of a good or service sold by the price of the good or service.

Due to rise in price, total revenue may increase or decrease. Whether it will increase or decrease depends on the price elasticity of demand. If a good is price inelastic, then increase in price of the good will reduce the quantity demand by a minimal amount. So, total revenue will increase because now consumers will pay a higher price for the good and total goods sold will not fall drastically.

Similarly, if the good is demand elastic, then even a small price change will result in demand falling for the good drastically and as a result total revenue will decrease as well.

So, the first three options are incorrect.