If the price of a commodity with elastic demand increases, the revenue accruing to the...
ECONOMICS
JAMB 2010
If the price of a commodity with elastic demand increases, the revenue accruing to the producer will
- A. double
- B. increase
- C. be constant
- D. decrease
Correct Answer: D. decrease
Explanation
If the demand for a good is elastic, the producer revenue will reduce. This is because, when there is an increase in price it will lead to a decrease in the quantity demanded, consumers would most likely move on to consume a substitute, hence the producer of that product would loose revenue as a result of a drop in sales.
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