{"id":197574,"date":"2025-03-07T11:10:16","date_gmt":"2025-03-07T11:10:16","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=197574"},"modified":"2025-03-07T11:10:18","modified_gmt":"2025-03-07T11:10:18","slug":"demand-is-along-the-upper-half-of-a-linear-demand-curve-so-an-increase-in-quantity-from-a-decrease-in-price-increases-total-revenue","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/07\/demand-is-along-the-upper-half-of-a-linear-demand-curve-so-an-increase-in-quantity-from-a-decrease-in-price-increases-total-revenue\/","title":{"rendered":"Demand is along the upper half of a linear demand curve, so an increase in quantity from a decrease in price increases total revenue"},"content":{"rendered":"\n<p>Demand is along the upper half of a linear demand curve, so an increase in quantity from a decrease in price increases total revenue. Demand is along the lower half of a linear demand curve, so an increase in quantity from a decrease in price decreases total revenue. Total revenue is maximized at the midpoint of a linear demand curve, where demand is unit elastic.<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>The correct answer is:<\/p>\n\n\n\n<p><strong>Total revenue is maximized at the midpoint of a linear demand curve, where demand is unit elastic.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>In economics, <strong>total revenue<\/strong> refers to the total income a firm receives from the sale of its goods or services. It is calculated by multiplying the price per unit by the quantity sold:<\/p>\n\n\n\n<p>[<br>TR = P \\times Q<br>]<\/p>\n\n\n\n<p>The relationship between price, quantity, and total revenue on a demand curve can be analyzed using the concept of <strong>price elasticity of demand<\/strong> (PED), which measures how sensitive the quantity demanded is to a change in price.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Elastic Demand (Price Elasticity > 1)<\/strong>: In this region, a decrease in price leads to a proportionally larger increase in quantity demanded. As a result, total revenue increases.<\/li>\n\n\n\n<li><strong>Inelastic Demand (Price Elasticity &lt; 1)<\/strong>: In this region, a decrease in price leads to a proportionally smaller increase in quantity demanded. As a result, total revenue decreases.<\/li>\n\n\n\n<li><strong>Unit Elastic Demand (Price Elasticity = 1)<\/strong>: This occurs at the <strong>midpoint<\/strong> of the demand curve. Here, a change in price leads to an exactly proportional change in quantity demanded, so total revenue remains constant.<\/li>\n<\/ul>\n\n\n\n<p>The <strong>linear demand curve<\/strong> is typically characterized by the following behavior:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Upper Half (Elastic Region)<\/strong>: In this region, the demand is elastic. A decrease in price leads to a larger increase in quantity demanded, which increases total revenue.<\/li>\n\n\n\n<li><strong>Lower Half (Inelastic Region)<\/strong>: In this region, the demand is inelastic. A decrease in price leads to a smaller increase in quantity demanded, which decreases total revenue.<\/li>\n\n\n\n<li><strong>Midpoint (Unit Elastic Region)<\/strong>: This is the point where the demand curve is <strong>unit elastic<\/strong>, meaning that the percentage change in price equals the percentage change in quantity demanded. At this point, total revenue is maximized.<\/li>\n<\/ol>\n\n\n\n<p>Thus, the total revenue is maximized at the midpoint of the linear demand curve, where demand is unit elastic.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/03\/image-513.png\" alt=\"\" class=\"wp-image-197575\"\/><\/figure>\n\n\n\n<p>Here is the graphical representation of the linear demand curve showing the different regions: elastic, unit elastic, and inelastic. As you can see, total revenue is maximized at the midpoint of the curve, where the demand is unit elastic.<\/p>\n\n\n\n<p>In the elastic region (upper half), a price decrease increases total revenue, while in the inelastic region (lower half), a price decrease decreases total revenue.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Demand is along the upper half of a linear demand curve, so an increase in quantity from a decrease in price increases total revenue. Demand is along the lower half of a linear demand curve, so an increase in quantity from a decrease in price decreases total revenue. Total revenue is maximized at the midpoint [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-197574","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/197574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=197574"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/197574\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=197574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=197574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=197574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}