Concept:When demand is inelastic, the percentage change in quantity demanded is smaller than the percentage change in price.
Explanation:If a firm raises the price of a product with inelastic demand, buyers reduce their quantity demanded only slightly.
The small loss in sales is outweighed by the higher price earned on each unit sold.
Therefore, total revenue, which equals price multiplied by quantity sold (
TR=P×Q), moves in the same direction as price.
So an increase in price leads to an increase in total revenue.
Answer:Total revenue will
increase.
Correct option:
A. increase.