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Essay question 1-2 paragraphs each please: What effect does a price hike have on the total...

Essay question 1-2 paragraphs each please:

What effect does a price hike have on the total revenue of the producers?

Homework Answers

Answer #1

The effect of a price hike on total revenue depends on the price elasticity of demand.
When the demand is inelastic i.e. price elasticity of demand is less than 1, then price hike leads to increase in total revenue for the producers.
When the demand is elastic i.e. price elasticity of demand is more than 1, then price hike leads to decrease in total revenue for the producers.
When the demand is unitary elastic i.e. equal to 1, then price hike leads to no change in total revenue.

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