Question

How does total revenue received by a firm change as a function of price? Why?

How does total revenue received by a firm change as a function of price? Why?

Homework Answers

Answer #1

Total revenue of a firm is the market value of all the sales that the firm makes. it basically is equal to the market price of the product multiplied by the amount of sale. total revenue is thus a function of quantity of sales multiplied by the price. thus it is directly proportional to the price. as price will increase the total revenue of the firm will increase keeping the quantity constant. thus change in price will clearly appear as change in total revenue.

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