If demand for a good is extremely elastic, raising the price of that good typically has what effect on total revenue? radio_button_unchecked No discernible change radio_button_unchecked Increases radio_button_unchecked Decreases SUBMIT

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03-03-2020
Business

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If demand for a good is extremely elastic, raising the price of that good typically has what effect on total revenue? radio_button_unchecked No discernible change radio_button_unchecked Increases radio_button_unchecked Decreases SUBMIT

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eooyibo123 eooyibo123 · Answer 1 · 2020-03-04T08:57:13+01:00

Answer:

Decreases.

Explanation:

The law of demand states that for an elastic good an increase in price results in a decrease in quantity demanded.

Elasticity of demand is the degree of responsiveness of quantity demanded to changes in price.

When a good is highly elastic that means the elasticity is above 1. For example if elasticity is 2, an increase in price by 1 unit will result in a decrease in quantity supplied by 2 units.

As total revenue is equal to price multiplied by units sold, total revenue will also reduce with price increase of a highly elastic good.