Assume that as a firm decreases its price its total revenue decreases. Which of the following is a possible value of its price elasticity of demand? ? ?. 1.4 ? ?. 0.4 O C. 1 O D. 4
Added by Gabriel R.
Close
Step 1
When a firm decreases its price, there are two possible scenarios for the effect on total revenue: Show more…
Show all steps
Your feedback will help us improve your experience
Chai Santi and 50 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Think back to our discussions of changes in total revenue and price and how the concept of elasticity was used. When a firm decreases price and demand is elastic, the percentage change in quantity demanded will be A) ______________ (greater than / less than) the percentage change in price. Therefore, revenue will B) ______________ (increase / decrease). If the demand is inelastic, total revenue will C) ______________ (increase / decrease) when price decreases.
Jennifer S.
1) If a firm finds the demand for one of its products is inelastic, it can increase its total revenues by? A) increasing fixed costs only. B) increasing variable costs only. C) lowering its price. D) raising its price. E) increasing both fixed and variable costs.
Dave K.
For each of the following absolute values of price elasticity of demand, indicate whether demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic. In addition, determine what would happen to total revenue if a firm raised its price in each elasticity range identified. a. ED = 2.5 b. ED = 1.0 c. ED = ∞ d. ED = 0.8
Haricharan G.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD