Which of these values of price elasticity will result in no change in total revenue if a firm increases its price?

Choose 1 answer:
(A) 1
(B) 0
(C) 3
(D) 0.5
() $\infty$

Question

Which of these values of price elasticity will result in no change in total revenue if a firm increases its price?

Choose 1 answer:
(A) 1
(B) 0
(C) 3
(D) 0.5
() $\infty$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Elasticity of Demand: Price elasticity of demand (PED) measures the responsiveness of the quantity demanded to a change in price. It is calculated as $ ext{PED} = \frac{\% ext{change in quantity demanded}}{\% ext{change in price}} $. ‖‖ b ⋮ Total Revenue and Elasticity: Total revenue (TR) is calculated as $ ext{TR} = ext{Price} imes ext{Quantity} $. The relationship between price elasticity and total revenue is crucial. ‖‖ c ⋮ Unit Elastic Demand: When the price elasticity of demand is exactly 1 (unit elastic), a change in price does not affect total revenue. This is because the percentage change in quantity demanded is exactly equal to the percentage change in price. ‖ ∻Answer∻ ⚹ (A) 1 ⚹ ∻Key Concept∻ ⚹ Unit Elasticity ⚹ ∻Explanation∻ ⚹ When the price elasticity of demand is 1, the percentage change in quantity demanded is equal to the percentage change in price, resulting in no change in total revenue. ⚹◊What is the formula for calculating price elasticity of demand?⍭ Generate me a similar question◊

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