Check Your Understanding

1. Question

   For each case, choose the condition that characterizes demand: elastic demand, inelastic demand, or unit-elastic demand.

   1. Total revenue decreases when price increases.

   2. When price falls, the additional revenue generated by the increase in the quantity sold is exactly offset by the revenue lost from the fall in the price received per unit.

   3. Total revenue falls when output increases.

   4. Producers in an industry find they can increase their total revenues by working together to reduce industry output.

2. Question

   For the following goods, is demand elastic, inelastic, or unit-elastic? Explain. What is the shape of the demand curve?

   1. demand by a snake-bite victim for an antidote

   2. demand by students for blue pencils