Asked by Frank Winds on Sep 24, 2024
Verified
If the price elasticity of demand is -0.8 and the firm increases price,revenue will
A) Increase
B) Decrease
C) Stay constant
D) become zero,they would lose all their customers
Price Elasticity
A measure of how much the quantity demanded of a good changes in response to a change in its price.
Revenue
The total income generated from normal business operations, such as sales of goods or services, before any expenses are deducted.
Firm Increases Price
A strategic decision by a company to raise the selling prices of its products or services, possibly due to increased costs or in response to high demand.
- Understand the relationship between price elasticity of demand and revenue.
Verified Answer
DR
Daniela Rodriguez3 days ago
Final Answer :
A
Explanation :
When the price elasticity of demand is less than 1 in absolute value (inelastic), increasing the price leads to an increase in revenue because the percentage decrease in quantity demanded is less than the percentage increase in price.
Learning Objectives
- Understand the relationship between price elasticity of demand and revenue.