Essay question 1-2 paragraphs each please:
What effect does a price hike have on the total revenue of the producers?
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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