CA Foundation Exam > CA Foundation Questions > If the demand is price inelastic:a)An increas...
Start Learning for Free
If the demand is price inelastic:
- a)An increase in price must raise profits
- b)An increase in price decreases revenue
- c)An increase in price increases revenue
- d)A decrease in price reduces sales
Correct answer is option 'C'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
If the demand is price inelastic:a)An increase in price must raise pro...
This means that the percentage change in quantity demanded is less than the percentage change in price; this means a price increase will increase revenue.
Most Upvoted Answer
If the demand is price inelastic:a)An increase in price must raise pro...
Explanation:
Price Inelastic Demand:
Price inelastic demand refers to a situation where a change in price does not have a proportionate change in quantity demanded. In other words, the demand is not very responsive to changes in price.
Impact on Revenue:
When demand is price inelastic, an increase in price can actually lead to an increase in revenue. This is because while the quantity demanded may decrease due to the higher price, the increase in price per unit can offset this decrease in quantity. As a result, the total revenue (price x quantity) may increase.
Example:
For example, let's consider a luxury brand that sells high-end watches. The demand for these watches may be price inelastic as consumers who value the brand and quality may be willing to pay a higher price. If the brand increases the price of its watches, the quantity demanded may decrease slightly, but the increase in price per watch may lead to a higher total revenue.
Conclusion:
Therefore, when demand is price inelastic, an increase in price can lead to an increase in revenue. This is because the higher price per unit can compensate for the decrease in quantity demanded, resulting in a higher total revenue.
Price Inelastic Demand:
Price inelastic demand refers to a situation where a change in price does not have a proportionate change in quantity demanded. In other words, the demand is not very responsive to changes in price.
Impact on Revenue:
When demand is price inelastic, an increase in price can actually lead to an increase in revenue. This is because while the quantity demanded may decrease due to the higher price, the increase in price per unit can offset this decrease in quantity. As a result, the total revenue (price x quantity) may increase.
Example:
For example, let's consider a luxury brand that sells high-end watches. The demand for these watches may be price inelastic as consumers who value the brand and quality may be willing to pay a higher price. If the brand increases the price of its watches, the quantity demanded may decrease slightly, but the increase in price per watch may lead to a higher total revenue.
Conclusion:
Therefore, when demand is price inelastic, an increase in price can lead to an increase in revenue. This is because the higher price per unit can compensate for the decrease in quantity demanded, resulting in a higher total revenue.
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer?
Question Description
If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer?.
If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer?.
Solutions for If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice If the demand is price inelastic:a)An increase in price must raise profitsb)An increase in price decreases revenuec)An increase in price increases revenued)A decrease in price reduces salesCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup