Economics · Price Elasticity & Revenue Relations
Consider the following statements regarding the relationship between Price Elasticity of Demand (Ed), Marginal Revenue (MR), and Total Revenue (TR): Statement 1: When the price elasticity of demand is greater than unity (Ed > 1), marginal revenue is positive and a decrease in price leads to an increase in total revenue. Statement 2: When the price elasticity of demand is less than unity (Ed < 1), marginal revenue is zero and total revenue remains constant at its maximum point. Which of the following options is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both Statement 1 and Statement 2 are false.
- 2Statement 1 is false, but Statement 2 is true.
- 3Statement 1 is true, but Statement 2 is false.✓
- 4Both Statement 1 and Statement 2 are true.
Correct answer
Statement 1 is true, but Statement 2 is false.
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