with the aid of diagrams explain the relationship between price elasticity of demand and total revenue
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Expert's answer
2018-07-17T15:36:08-0400
When demand is inelastic – a rise in price leads to a rise in total revenue – a 20% rise in price might cause demand to contract by only 5% (Ped = -0.25). When demand is elastic – a fall in price leads to a rise in total revenue - for example a 10% fall in price might cause demand to expand by only 25% (Ped = +2.5) When demand is perfectly inelastic(i.e. Ped = zero), a given price change will result in the same revenue change, e.g. a 5 % increase in a firm's prices results in a 5 % increase in its total revenue. Source: https://www.tutor2u.net/economics/reference/price-elasticity-of-demand-and-total-revenue
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