Question

The price elasticity if demand for iPhone X is 1.2 Apple want to increase its total revenue. Would you recommend that Apple raise or lower the price of iPhone X explain your answer

The demand of gasoline is more inelastic in the short run than in long run. Why? Give examples that illustrate why the demand of gasoline in long run is not inelastic

Answer 1

1) Ed = 1.2 > 1 i.e. Elastic demand

When demand is elastic then decrease in price causes increase in total revenue.

2) Elasticity of demand depends upon the time period. Demand is inelastic in short period but elastic in long period. It is so because in the long-run, a consumer can change his habits more coveniently than in the short period.

Demand for gasoline is elastic in long run because consumer adjust towards or againt gasoline in the long run if price of gasoline reduces or increases.