Multiple Choice
A price change causes the quantity demanded of a good to decrease by 20 percent, while the total revenue increased by 10 percent. The demand curve is:
4. Elasticity
Total Revenue Test
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The following demand schedule relates to the market for computer chips. What happens to total revenue if the price falls from $400 to $350?
A
Total Revenue increases by $250
B
Total Revenue increases by $500
C
Total Revenue decreases by $250
D
Total Revenue decreases by $500
Verified step by step guidance1
Identify the initial and new prices from the demand schedule: the initial price is $400 and the new price is $350.
Find the corresponding quantities demanded for these prices: at $400, the quantity demanded is 30 units, and at $350, it is 35 units.
Calculate the initial total revenue by multiplying the initial price by the initial quantity demanded: Total Revenue at $400 = $400 * 30.
Calculate the new total revenue by multiplying the new price by the new quantity demanded: Total Revenue at $350 = $350 * 35.
Determine the change in total revenue by subtracting the initial total revenue from the new total revenue. Analyze whether the total revenue increases or decreases based on this calculation.
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