If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result

If a company needs to raise the prices of some its products, it should choose to raise the prices of ______ products because relatively fewer customers will stop buying the product as a result

• A. Inelastic
• B. Elastic
• C. Unit elastic
• D. Perfectly elastic

Answer: (A)

Price elasticity of demand shows how much buyers change their purchasing when the price changes. When demand is inelastic, the quantity bought falls only a little even if the price goes up, so total revenue (price × quantity) tends to rise with a price increase. That’s exactly why raising prices should target inelastic products—the market still buys them even at higher prices, so the company can boost revenue without losing many sales. For contrast, elastic demand means price increases lead to a large drop in quantity, which can reduce revenue. Unit elasticity would keep revenue roughly the same with price changes, and perfectly elastic demand implies any price rise would drop sales to zero. So the best fit is inelastic products, where fewer customers stop buying as prices rise.

Price elasticity of demand shows how much buyers change their purchasing when the price changes. When demand is inelastic, the quantity bought falls only a little even if the price goes up, so total revenue (price × quantity) tends to rise with a price increase. That’s exactly why raising prices should target inelastic products—the market still buys them even at higher prices, so the company can boost revenue without losing many sales.

For contrast, elastic demand means price increases lead to a large drop in quantity, which can reduce revenue. Unit elasticity would keep revenue roughly the same with price changes, and perfectly elastic demand implies any price rise would drop sales to zero. So the best fit is inelastic products, where fewer customers stop buying as prices rise.