When demand is perfectly inelastic, an increase in price will result in

April 15, 2024 by rawan239

demand is perfectly inelastic, the quantity demanded does not change at all when the price changes. This means that if the price goes up, people will still buy the same amount of the product, and if the price goes down, people will still buy the same amount of the product.

Total revenue is equal to price times quantity demanded. So, if the quantity demanded does not change, then an increase in price will lead to a decrease in total revenue.

For example, let’s say that the demand for a product is perfectly inelastic, and the current price is $10 and the quantity demanded is 100 units. If the price goes up to $11, the quantity demanded will still be 100 units. So, total revenue will be $1100. However, if the price goes down to $9, the quantity demanded will still be 100 units. So, total revenue will be $900.

In conclusion, when demand is perfectly inelastic, an increase in price will result in a decrease in total revenue.