Question

QUESTION 2

Define demand price elasticity. Indicate how you would use (the administrator), the information of an investigation paid by your company according to which the absolute price elasticity of the demand of your product is 1.3 and not 0.6 as previously thought. In other words, would you recommend raising the prices of your product so that your company earns more revenue or not?

Answer 1

Define demand price elasticity.

price elasticity of demand is the measure of responsiveness change in quantity demanded when there is change in price.

it can be measure by dividing percentage change in quantity with percentage change in price.

Indicate how you would use (the administrator), the information of an investigation paid by your company according to which the absolute price elasticity of the demand of your product is 1.3 and not 0.6 as previously thought. In other words, would you recommend raising the prices of your product so that your company earns more revenue or not?

Answer:

when price elasticity is greater than 1 it is known as Elastic demand.

when price elasticity of demand is elastic , price and total revenue moves into the opposite direction.

would you recommend raising the prices of your product so that your company earns more revenue or not?

NO!

because here price elasticity is 1.3, it is elastic demand and revenue and price moves opposite direction. when price will increase, revenue will decrease and when price will decrease revenue will increase.