Question

When TR is increasing with every fall in
price, the price elasticity of demand is​

Answer 1

Answer : When TR is increasing with every fall in price, ​ the price elasticity of demand is greater than or equal to 1.

Explanation :

The price elasticity of demand is a measure of the sensitivity of the quantity demanded of a product or service to changes in its price. When the price elasticity of demand is greater than or equal to 1, it means that the demand for the product or service is elastic, which means that the percentage change in quantity demanded is greater than the percentage change in price. In other words, the demand for the product or service is sensitive to changes in price, and a decrease in price is likely to result in an increase in the quantity demanded.

If the total revenue (TR) is increasing with every fall in price, it suggests that the price elasticity of demand for the product or service is elastic. This is because a decrease in price leads to an increase in the quantity demanded, which in turn leads to an increase in total revenue. The TR curve in this case will be downward sloping, indicating that as the price of the product or service decreases, the total revenue generated from its sale increases.

On the other hand, if the total revenue is decreasing with every fall in price, it suggests that the price elasticity of demand is inelastic, which means that the percentage change in quantity demanded is less than the percentage change in price. In this case, the demand for the product or service is relatively insensitive to changes in price, and a decrease in price is likely to result in a decrease in total revenue. The TR curve in this case will be upward sloping, indicating that as the price of the product or service decreases, the total revenue generated from its sale decreases.

Here is a point-wise summary of the key points to consider when discussing the relationship between total revenue (TR) and price elasticity of demand :

• The price elasticity of demand is a measure of the sensitivity of the quantity demanded of a product or service to changes in its price.

• When the price elasticity of demand is greater than or equal to 1, it means that the demand for the product or service is elastic, which means that the percentage change in quantity demanded is greater than the percentage change in price.

• If the total revenue (TR) is increasing with every fall in price, it suggests that the price elasticity of demand for the product or service is elastic.

• This is because a decrease in price leads to an increase in the quantity demanded, which in turn leads to an increase in total revenue.

• The TR curve in this case will be downward sloping, indicating that as the price of the product or service decreases, the total revenue generated from its sale increases.

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