Question #310349

Suppose that the seller decrease Price for his/her good by5 percent.Discuss how total revenue changes when 1) ed=0.3 2) end =1 3). ed =1.5

1
Expert's answer
2022-03-14T13:16:38-0400

Solution

When Ed=0.3, percentage change in quantity will slightly increase by

 0.3×5%=1.5%0.3\times 5\%=1.5\% ,

So total revenue will increase by 

0.3×5%=1.5%0.3\times 5\%=1.5\%


when Ed=1, total revenue will increase by

 1×5=5%1\times5=5\% 

when prices decrease by the said percentage.


when Ed=1.5, total revenue will increase by

 1.5×5%=7.5%1.5\times 5\%=7.5\% 

Since an elasticity of demand above 1 shows customers react more to changes in price.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!
LATEST TUTORIALS
APPROVED BY CLIENTS