Calculate price elasticity of demand and explain its relationship with total revenues

Question

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Answer 1

Textbook Question

Chapter 19, Problem 19.1LO

Calculate price elasticity of demand and explain its relationship with total revenues

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

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Answer 2

Textbook Question

Chapter 19, Problem 19.1LO

Calculate price elasticity of demand and explain its relationship with total revenues

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 19, Problem 19.1LO

Calculate price elasticity of demand and explain its relationship with total revenues

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 19, Problem 19.1LO

Calculate price elasticity of demand and explain its relationship with total revenues

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

Answer 8

Expert Solution & Answer

To determine

Price elasticity of demand and its relationship with total revenues

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.

Economics Concept Introduction

Concept Introduction:

Price Elasticity: It refers to responsiveness of demand to the change in price.

Total Revenue- It refers to the total income a firm receives from the sale of its output.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Price elasticity of demand and its relationship with total revenues

Answer 12

Explanation of Solution

Price elasticity of demand can be calculated with the analysis of change in demanded quantity when there is a change in price. When the quantity demanded for a unit change in price is more than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price is less than a unit, we say it is relatively elastic. When the quantity demanded for a unit change in price leads to a unit change in demand, we say it is unitary elastic.

To understand the relationship between elasticity and total revenue, we can analyze it with quantity effect and price effect.

If elastic: The quantity effect outweighs the price effect, meaning if we decrease prices, the revenue gained from the more units sold will outweigh the revenue lost from the decrease in price.

If inelastic: The price effect outweighs the quantity effect, meaning if we increase prices, the revenue gained from the higher price will outweigh the revenue lost from less units sold.