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WAEC Economics 2016 Question 8

Question 8

Elasticity

What effect will an increase in price have on the total revenue of a firm whose product has inelastic demand? Total revenue will

  1. A.increase.
  2. B.fall.
  3. C.fluctuate.
  4. D.remain unchanged.
Show the answer and explanation

Answer: A (increase.)

Explanation

With inelastic demand quantity falls by a smaller percentage than price rises, so revenue goes up.