Question

When demand is inelastic, an increase in price will cause
a. a decrease in total revenue.
b. no change in total revenue but an increase in quantity demanded.
c. no change in total revenue but a decrease in quantity demanded.
d. an increase in total revenue.

Answer 1

Answer:

The correct answer is d. an increase in total revenue.

Explanation:

In inelastic markets, demand is almost independent of price variations. Therefore, the best pricing strategy in this case is to increase the price to sell the same amount as before (that is, before the price increase), and maximize profit margins as a result.