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 – decrease

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.