Answer to Question #83251 in Microeconomics for Loai Al-jishi

Question

can electric utility companies always raise their total revenue by raising their rates? Explain your answer.

What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain your answer

Answer 1

1. Yes, when the demand is inelastic, an increment of prices result in the increase in total revenue. However, the rise in price leads to a reduction in demand.

2. Elastic demand results in the rise of total revenue. This aspect results in the increase in demand of the burger in the shop next door that reduces the demand of the pizza.