Question

Sony is considering a 10% price reduction on his HD TV sets if the pre-elasticity coefficient forThe sets in this price range is 0.75 then the price cut will cause

Answer 1

Since Sony is considering a 10% price reduction on his HD TV sets if the pre-elasticity coefficient for the sets in this price range is 0.75

Price elasticity of demand=0.75

So it is inelastic demand because Ed is less than the 0.75

When when there is price cut and demand is inelastic, then Total revenue decreases. this is because due to price cut, the quantity demand decreases.

Hence it can be said that due to price cut in case of inelastic demand TR will decrease.

then the price cut will cause