If demand is inelastic and price is raised, total revenue will (LO3) a) rise b) fall c) stay the same d) possibly rise or possibly fall

Price elasticity of demand is a measure of the sensitivity of the quantity demanded to a change in price. It is calculated as: Elasticity = \(\frac{\%\ \textrm{change in quantity demanded}}{\%\ \textrm{change in price}}\) If the absolute value of elasticity is less than 1, the demand is inelastic; if it's greater than 1, the demand is elastic, and if it's equal to 1, the demand is unitary elastic. The relationship between price elasticity of demand and total revenue is as follows: 1. When the demand is inelastic (elasticity < 1), an increase in price leads to an increase in total revenue, and a decrease in price leads to a decrease in total revenue. 2. When the demand is elastic (elasticity > 1), an increase in price leads to a decrease in total revenue, and a decrease in price leads to an increase in total revenue. 3. When the demand is unitary elastic (elasticity = 1), a change in price does not affect total revenue.

As per the given exercise, we know that demand is inelastic. Now, we will analyze the effect of a price increase on total revenue in this case. Since the demand is inelastic, the absolute value of the price elasticity is less than 1. Therefore, when the price is increased, the percentage change in quantity demanded will be smaller than the percentage change in price. This means that the increase in price will result in an increase in total revenue. Thus, the correct answer in this case is: a) rise