Answer to Question #163120 in Microeconomics for aiman

Question

if 0 > ex,p -1 where ex,p is own price elasticity of demand then the demand is what. price and total spending move in which direction?

Answer 1

With inelastic demand (the value of the elasticity coefficient E <1), an increase in the price P will lead to an insignificant decrease in the number of goods sold Q, which means that the product of these values increases, that is, sales revenue grows. Thus, in the event of inelastic demand, it is beneficial for the seller to raise the price. With elastic demand (elasticity coefficient E> 1), an increase in the price P will lead to a more significant decrease in the quantity of goods Q sold, which means that the sales proceeds are falling. With elastic demand, it is not profitable to raise the price.