Question:

Will a producers total revenue increase if the price rises and demand is elastic?

by  |  earlier

0 LIKES UnLike

Will a producers total revenue increase if the price rises and demand is elastic?

 Tags:

   Report

3 ANSWERS


  1. Total revenue will fall, but if price falls, then TR will increase (up to the unitary elasticity point/range).


  2. If demand is elastic then total revenue and price move in opposite directions.  Thus if price rises, TR will decrease.  Elastic implies "responsiveness".  When the price goes up, consumers respond by buying less...quite a bit less...reducing the revenues of the firm.

  3. TR declines if demand is elastic and price rises.  TR rises if demand is elastic and price falls.  It is important to note, however, that this is all about the points on the respective demand curve (i.e, some points will be elastic some points inelastic and points could possible be unitary)  The shape of the curve tells you the elasticity of demand.  Horizontal curve are perfectly elastic.  Vertical curves are perfectly inelastic.  The closer the curve comes to these respective extreme mes determines the degree of elasticity.

Question Stats

Latest activity: earlier.
This question has 3 answers.

BECOME A GUIDE

Share your knowledge and help people by answering questions.