Answer to Question #138099 in Microeconomics for Mohammad omer siddiqui

Question

Assuming a simple linear market demand curves of goods x, explain the relationship between price, total and marginal revenue and elasticity of demand using your answer, explain why might a revenue maximizing from selling a luxury good reduce jts product price.

Answer 1

Marginal revenue is the change in total revenue that occurs when one additional unit of a good is produced and sold. A seller can sell an additional unit of output by lowering the products price thus maximizing revenue of a laxurious good reduces it's price.