Which of the following indicates inelastic demand?

Which of the following indicates inelastic demand?

• A. Leftward shift of the supply curve raises total revenue.
• B. The good has close substitutes.
• C. The smaller angle between the vertical axis and the demand curve is less than 45 degrees.
• D. Large shifts of the supply curve lead to only small changes in price.

Answer: (A)

Total revenue rises when price goes up while quantity demanded falls only a little. Inelastic demand means consumers are not very responsive to price changes, so percentage changes in quantity demanded are smaller than percentage changes in price. A leftward shift of the supply curve pushes the market price up and reduces the quantity traded. If demand is inelastic, the price increase dominates the smaller drop in quantity, so total revenue increases. That’s why this option signals inelastic demand. The other statements don’t reliably indicate inelastic demand: close substitutes tend to make demand more elastic; a geometric criterion about an angle is not a standard, reliable test of elasticity; and large supply shifts that cause only small price changes would generally suggest a different dynamic, not the typical sign of inelastic demand.

Total revenue rises when price goes up while quantity demanded falls only a little. Inelastic demand means consumers are not very responsive to price changes, so percentage changes in quantity demanded are smaller than percentage changes in price.

A leftward shift of the supply curve pushes the market price up and reduces the quantity traded. If demand is inelastic, the price increase dominates the smaller drop in quantity, so total revenue increases. That’s why this option signals inelastic demand.

The other statements don’t reliably indicate inelastic demand: close substitutes tend to make demand more elastic; a geometric criterion about an angle is not a standard, reliable test of elasticity; and large supply shifts that cause only small price changes would generally suggest a different dynamic, not the typical sign of inelastic demand.