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The total revenue test

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What happens to total revenue when the price of milk is increased. Why?

Inelastic goods (goods in which consumers are less responsive to changes in price): e < 1

Elastic goods (goods in which consumers are more responsive to changes in price): e >1

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Solution Summary

This solution comments on the elasticity of milk and what would happen to the total revenue of a dairy company if the price of milk were to rise.

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Total revenue will rise when the price of milk is increased.

The total revenue test states that total revenue rises when the price of an inelastic good is increased. ...

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