Answer to Question #75646 in Economics for pooja

Question

A product is being priced at 100€ and is being sold 3,000 times. The price elasticity is estimated to be -2.0. By how much would the revenues change when increasing the price by 5%? (Negative if a decrease and positive if an increase)

Answer 1

A product is being priced at 100€ and is being sold 3,000 times. The price elasticity is estimated to be -2.0. If the price increases by 5%, then the quantity will decrease by 5%*2 = 10% and the total revenues will decrease by 1.05*0.9 - 1 = -0.055 or -5.5%.