Answer to Question #272670 in Microeconomics for ash

Question

Now suppose that the only change you expect is a 7% increase in the price of your

aircraft. Estimate sales this year and discuss the impact on total revenues.

Answer 1

Solution:

The law of demand states that other factors being constant price and quantity demand of any good and service are inversely related. That is when the price of a good rises, consumers demand fewer units and vice versa.

When there is a 7% increase in the aircraft price, consumers will tend to demand fewer aircraft and total sales will decline by a bigger margin. You will be able to sell fewer aircraft as a result of the price increase holding all other things constant.

 

Due to a decrease in sales, the total revenues will be greatly affected. There will a massive decline in total revenues for the company.