Answered: If the price elasticity of demand for…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 2E: The price elasticity of demand for personal computers is estimated to be 2.2. If the price of...

See similar textbooks

Related questions

Question

If the price elasticity of demand for canned soup is estimated at 1.62. What happens to sales revenue if the price of canned soup rises?

		It rises by 1.62 percent.
		It falls.
		It rises.
		It falls by 162 percent.

Expert Solution

Step 1

If the price elasticity of demand for canned soup is estimated at 1.62. That means the good is price elastic. So, for a price elastic good, if the price increases, then the demand for that good will fall. Therefore, the sales revenue, that is the product of the price and the quantity sold will fall, because the rate of rise in price is lower than the rate of fall in quantity. Hence, the overall sales revenue falls.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions