PED And Total Revenue

Question 1

How do you calculate total revenue?

Answer 1

Price X quantity

Question 2

What is the relationship between PED and total revenue?

Answer 2

Effects pricing decisions to increase total revenue

Question 3

If demand for the firms good is price elastic and they increase price what will happen to total revenue?

Answer 3

Total revenue falls (quantity demanded falls proportionally more than increase in price)

Question 4

If demand for the firms good is price elastic and they decrease price what will happen to total revenue?

Answer 4

Total revenue increase (Quantity demanded increase proportionally more than decrease in price)

Question 5

If demand for the firms good is price inelastic and they increase price what will happen to total revenue?

Answer 5

Same thing total revenue increase (quantity demanded falls proportionally less than increase in price)

Question 6

If demand for the firms good is price inelastic and they decrease price what will happen to total revenue?

Answer 6

Same thing total revenue decrease (quantity demanded increases proportionally less than decrease in price)

Question 7

If demand is price inelastic what should firms do (ceteris paribus)?

Answer 7

Increase price to increase total revenue

Question 8

If demand is price elastic what should firms do (ceteris paribus)?

Answer 8

Reduce price to increase total revenue