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JAMB Economics 2010 Question 9

Question 9

Elasticity

If the price of a commodity with elastic demand increases, the revenue accruing to the producer will

  1. A.double
  2. B.increase
  3. C.be constant
  4. D.decrease.
Show the answer and explanation

Answer: D (decrease.)

Explanation

With elastic demand, quantity falls by a bigger percentage than price rises, so total revenue falls.