Question

Describe how elasticity will determine the change in revenue as the price of a product increases?

Describe how elasticity will determine the change in revenue as the price of a product increases?

Homework Answers

Answer #1

Determining the change in revenue :

The total revenue test is a means for determining whether demand is elastic or inelastic. If an increase in price of a product causes an increase in total revenue, then demand can be said to be inelastic, since the increase in price of a product does not have a large impact on quantity demanded. If an increase in price causes a decrease in total revenue, then demand can be said to be elastic, since the increase in price has a large impact on quantity demanded.

Different commodities may have different elasticity depending on whether people need them (necessities) or want them (accessories).

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