Question

If the demand for insulin is price inelastic, a 5 percent increase in the price of insulin will


have no effect on the total revenue of insulin producers


a

increase the total revenue of insulin producers


b

decrease the total revenue of insulin producers


c

decrease the total spending on insulin by consumers


d

cause the demand for insulin to be less elastic

Answer 1

b

If demand is price inelastic (|elasticity| < 1), the percentage drop in quantity demanded is smaller than the percentage increase in price, so total revenue (P × Q) rises when price rises.