Assertion (A): A firm facing elastic demand can raise its revenue by cutting its price.
Reason (R): With elastic demand, quantity rises by a larger percentage than price falls.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Both are true, and R explains A: revenue = price × quantity, and the quantity gain outweighs the price cut.

Concept: Price cuts and revenue
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe total expenditure method

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Ten questions from Price Elasticity of Demand, at your own pace.

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Ten questions from Price Elasticity of Demand, at your own pace.

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Assertion (A): A firm facing elastic demand can raise its revenue by cutting its price.Reason (R): With elastic demand, quantity rises by a larger percentage than price falls.

Explanation

Assertion (A): A firm facing elastic demand can raise its revenue by cutting its price.
Reason (R): With elastic demand, quantity rises by a larger percentage than price falls.