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: Option D
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.