If the price elasticity of demand for a certain commodity is less than unity, then?
Answer Details
If the price elasticity of demand for a certain commodity is less than unity, then an increase in the price of the commodity will raise the total revenue of the producer. This means that the percentage increase in the price of the commodity will lead to a proportionately smaller decrease in the quantity demanded. As a result, the total revenue earned by the supplier will increase as the price increases. Conversely, if the price elasticity of demand is greater than unity, then an increase in the price of the commodity will lead to a decrease in total revenue, since the percentage decrease in quantity demanded will be proportionately larger than the percentage increase in price.