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Economics (AS & A Level) · May / June 2022 · Paper 11 · Question 5

9708Price elasticity, income elasticity and cross elasticity of demand

The producer of a good with a price-elastic demand observes that a rise in its price is accompanied by a rise in total revenue. What might explain this?

  1. AThe good is an inferior good.
  2. BThe rise in price was due to an increase in demand for the good.
  3. CThe supply of the good was inadequate to meet the demand.
  4. DThe supply of the good was price-inelastic.

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Correct answer: B. The rise in price was due to an increase in demand for the good.

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