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If the demand elasticity is more than 1 in absolute value and the supply decreases, which of the following statements is true

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If the demand elasticity is more than 1 in absolute value , this means demand is elastic and as supply decreases ,then the supply curve shifts to the left . As a result price increases and quantity decreases but the price increase is less than the decrease in equilibrium quantity because of elastic demand .Therefore, the revenue for the firm decreases . Hence, option (B) is correct. If demand is inelastic that is less than 1 then, the decrease in quantity is less than the increase in price , which increase the firm’s revenue.

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