Question

Suppose that your friend owns a coffee shop and raises the price of coffee. If you know that demand for coffee is relatively inelastic what will happen to total revenue because of this price change?

a. Total revenue will increase
b. Total revenue will not change
c. Total revenue will decrease
d. Total revenue will increase for a week and then decrease

Answer 1

If the demand for coffee is relatively inelastic and the price is raised, the total revenue will increase.

Step-by-step explanation:

If the demand for coffee is relatively inelastic and your friend raises the price of coffee at their coffee shop, the total revenue will increase. Inelastic demand means that a change in price will have a small impact on the quantity of coffee consumed. So, even if the price is increased, customers are still likely to purchase coffee, leading to higher total revenue.