Question

1. What can’t all businesses just raise prices when they need to raise profits?

Answer 1

Total Revenue = P *Q , As we know every owner want to maximize the total revenue of the firm . So it is impossible to raise prices , to raise the rpofits , because of law of demand which states negative relationship between prices and quantity . So if the prices rises , quantity demand will fall . it may fall larger then a rise in the prices . Suppose owner raises the prices of the good by 10 % , quanity demand may fall by 40 % of the product . Then in this case , owner's total revenue will fall eventutally , which rather than increasing profits , will have a plunging effect on profits . So to maintain the standard quantity demand of the product , it is impossible to raise the prices to raise the profits , unless firms is monopoly or have other imperfect competition behavior .