When demand is inelastic What is the relationship between price and total revenue?
a) If demand is price inelastic, then increasing price will decrease revenue. b) If demand is price elastic, then decreasing price will increase revenue. c) If demand is perfectly inelastic, then revenue is the same at any price. d) Elasticity is constant along a linear demand curve and so too is revenue.Click to see full…
a) If demand is price inelastic, then increasing price will decrease revenue. b) If demand is price elastic, then decreasing price will increase revenue. c) If demand is perfectly inelastic, then revenue is the same at any price. d) Elasticity is constant along a linear demand curve and so too is revenue.Click to see full answer. In this manner, what is the relationship between price elasticity of demand and total revenue? Ped is unit elastic (=1) and a firm raises price Total revenue remains the same Ped is -1.5 (elastic) and the firm raises price by 4% Total revenue decreases Ped is -0.4 (inelastic) and the firm raises price by 30% Total revenue increases Similarly, how does the total revenue test indicate demand elasticity? A total revenue test approximates the price elasticity of demand by measuring the change in total revenue from a change in the price of a product or service. The total revenue test assumes all other factors that may influence revenue will remain constant during the testing period. Just so, why do price and total revenue go in the same direction when the demand for the product is inelastic? When demand is inelastic, total revenue changes in the same direction as prices, since the price change more than compensates for the change in quantity, which is represented by a steep demand curve. Hence, raising prices increases revenue. Hence, increasing prices decreases revenue.Is Pepsi elastic or inelastic?Since the calculated amount is less than one the results indicate that this is an inelastic good. As Pepsi increases the price Pepsi’s revenue also increases. This yield is a negative answer which means that this is an inferior good. So as personal income increases the demand for Pepsi will decrease.
