What effect will an increase in price have on the total revenue of a firm whose product has inelastic demand? Total revenue will be?

A. increase
B. fall
C. fluctuate
D. remain unchanged

Correct Answer: Option A

A. increase

Explanation

If prices for inelastic goods are increased, the total revenue increases, but it would lead to a small decrease in quantity demanded. This means that firms that deal with inelastic goods or services can increase prices, selling a little less but making higher revenues.