The following demand schedule relates to the market for computer chips. What happens to total revenue if the price falls from \$400 to \$350?

• A. Total Revenue increases by \$250
• B. Total Revenue increases by \$500
• C. Total Revenue decreases by \$250
• D. Total Revenue decreases by \$500

Answer: (A)

Verified step by step guidance

1. Identify the initial and new prices from the demand schedule: the initial price is \$400 and the new price is \$350.
2. Find the corresponding quantities demanded for these prices: at \$400, the quantity demanded is 30 units, and at \$350, it is 35 units.
3. Calculate the initial total revenue by multiplying the initial price by the initial quantity demanded: Total Revenue at \$400 = \$400 * 30.
4. Calculate the new total revenue by multiplying the new price by the new quantity demanded: Total Revenue at \$350 = \$350 * 35.
5. Determine the change in total revenue by subtracting the initial total revenue from the new total revenue. Analyze whether the total revenue increases or decreases based on this calculation.