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If a firm lowers its price what is the likely impact?

If a firm lowers its price what is the likely impact?

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If a firm lowers it's price, demand for their product will increase according to the law of demand. This will effect the firm's total revenue. If the good that the firm sells, is inelastic in nature then lowering price will not effect the quantity demanded that much. As a result, total revenue (price times quantity) will decline. But if the good's demand is elastic, lowering price will increase the quantity demanded by greater amount and as a result total revenue will increase.

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