If the demand for donuts is elastic, then a decrease in the price of donuts will
a. increase total revenue of donuts sellers.
b. decrease total revenue of donuts sellers.
C. not change total revenue of donuts sellers.
d. change total revenue of donuts sellers but in an unknown way without more information.
Answer. a. increase total revenue of donuts sellers.
In elasticity of the demand is considerable that the amount of percentage change of the quantity demanded is larger than the amount of percentage change of price. This is one of the instances where the price decrease affects a higher percentage of quantity demanded. Hence, instead of the total revenues of donut sellers increasing, the change in price will only raise the prices multiplied by sales. It is thus because the number of units demanded increases relative to a price level, resulting in a total revenue. It is the case that in the event of elastic demand, the fall of prices gives rise to more than just proportionate volume of demand, which in its turn generates higher total revenue for the sellers. This notion is formed on the demand side where the price variable connects to the elasticity of the demand.