Asked by Shelby Bliss on Jun 26, 2024
Verified
Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of
A) W and Y.
B) Y and Z.
C) X and Z.
D) Z and W.
Price Elasticity Coefficients
Measures of how much the quantity demanded of a good responds to a change in the price of that good, expressed numerically.
Total Revenue
The overall income generated by a firm or entity from its sales or services before any costs or expenses are subtracted.
- Determine the relationship between elasticity and total revenue.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
A
Explanation :
Products W and Y have price elasticity coefficients greater than 1 (1.43 and 1.11, respectively), indicating that they are elastic. Therefore, a 1 percent decrease in price for these products will lead to a more than proportional increase in quantity demanded, increasing total revenue.
Learning Objectives
- Determine the relationship between elasticity and total revenue.