How to figure it out why the argument is wrong

Reference no: EM13188875

if demand is unit elastic (the elasticity is 1), a 1% price cut increases the quantity sold by 1% and total revenue does not change. the question is: Assume the initial price is 1 and the initial quantity demanded is 1, thus the total revenue is 1. Now suppose if the price increases by 1%, which is 1.01. Because of the unit elasticity, the quantity demanded will decrease by 1%, which is 0.99. Therefore, the total revenue is 1.01*0.99=0.9999<1. It seems that the total revenue does change! Can you figure it out why the argument is wrong?

Reference no: EM13188875

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