Asked by Kayla Lippoldt on Jun 26, 2024
Verified
If the quantity sold of two-liter Coke bottles increases by 10% when price falls by 2%,what is the total change in revenue?
A) Revenue increases by 12%
B) Revenue increases by 8%
C) Revenue falls by 8%
D) Revenue falls by 12%
Two-Liter Coke Bottles
A specific size of Coca-Cola bottle that contains two liters of the soft drink.
Revenue
Revenue refers to the total income generated from the sale of goods or services by a company before any expenses are subtracted.
- Analyze the effects of price changes on revenue depending on demand elasticity.
Verified Answer
PM
Priya MedurJun 26, 2024
Final Answer :
B
Explanation :
We can use the formula for revenue, which is Revenue = Price x Quantity.
Let R1 be the original revenue and R2 be the new revenue after the changes. Let P1 and Q1 be the original price and quantity sold, and P2 and Q2 be the new price and quantity sold, respectively.
We know that Q2 = 1.1Q1 and P2 = 0.98P1, based on the information given.
Substituting these values into the revenue formula, we get:
R2 = P2 x Q2 = 0.98P1 x 1.1Q1 = 1.078P1Q1
Therefore, the new revenue is 1.078 times the original revenue. The percentage change in revenue is:
(R2 - R1) / R1 x 100% = (1.078R1 - R1) / R1 x 100% = 0.078 x 100% = 7.8%
Since the percentage change is positive, it means that revenue increases. The answer is B: Revenue increases by 8%.
Let R1 be the original revenue and R2 be the new revenue after the changes. Let P1 and Q1 be the original price and quantity sold, and P2 and Q2 be the new price and quantity sold, respectively.
We know that Q2 = 1.1Q1 and P2 = 0.98P1, based on the information given.
Substituting these values into the revenue formula, we get:
R2 = P2 x Q2 = 0.98P1 x 1.1Q1 = 1.078P1Q1
Therefore, the new revenue is 1.078 times the original revenue. The percentage change in revenue is:
(R2 - R1) / R1 x 100% = (1.078R1 - R1) / R1 x 100% = 0.078 x 100% = 7.8%
Since the percentage change is positive, it means that revenue increases. The answer is B: Revenue increases by 8%.
Learning Objectives
- Analyze the effects of price changes on revenue depending on demand elasticity.
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