Based on your previous analysis of PED from the newspaper estimating that if it raises its price from 1 chf to 1.50 chf, then the number of subscribers will fall from 50000 to 40000. If the newspaper is only interested in revenue would you recommend:

Question

BlackTom AI · Accepted Answer

To analyze the revenue effect of a price change, we must compare the percentage change in price with the percentage change in quantity demanded.
Option a: 'Increase the price because the good is elastic.' This would be incorrect if the elasticity is less than 1 in magnitude; the calculation below shows the elasticity is inelastic, so the claim that demand is elastic is not supported by the given data.
Option b: 'Increase the price because the good is inelastic.' Here, we assess elasticity: price rises from 1 to 1.50, a 50% increase. Subscribers fall from 50,000 to 40,000, a 20% decrease. Elasticity = (% change in quantity) / (% change in price) = (-20%)/(+50%) = -0.4, which is inelastic (absolute value less than 1). In inelastic demand, raising price tends to increase total revenue because the percentage drop in quantity is smaller than the percentage rise in price. This aligns with the given data and revenue-maximizing intuition in inelastic cases.
Option c: 'Do not increase the price because the good is inelastic.' If demand is inelastic, a higher price can raise revenue, so recommending not to increase price would be counterintuitive given the goal of revenue maximization. The data suggest a revenue gain from increasing price, not preserving the current price.
Option d: 'Do not increase the price because the good is elastic.' This contradicts the elasticity assessment; the premise here would imply an elastic demand, but the observed changes indicate inelasticity, so this statement mischaracterizes the situation and would likely reduce potential revenue.
In summary, the comparison of price and quantity changes indicates a relatively inelastic response, which means a price increase would raise total revenue despite lowering subscribers. The other options either misclassify elasticity or draw the opposite revenue conclusion based on that misclassification.

Based on your previous analysis of PED from the newspaper estimating that if it raises its price from 1 chf to 1.50 chf, then the number of subscribers will fall from 50000 to 40000. If the newspaper is only interested in revenue would you recommend:单项选择题

类似问题

When there are many substitute products available, the price elasticity of demand for a given product will likely be Blank ______.

When a 10 percent decrease in price results in a less than 10 percent increase in quantity sold, the demand for the product or service is described as Blank ______.

If the absolute value of the price elasticity of demand for good X is 0.5, then a 10% decrease in the price of good X will result in which of the following?

The own-price elasticity of Starbucks coffee is -0.8, meaning __.

There are many different factors that impact the price elasticity of demand. More specifically, the proportion of budget and the income effect refer to how price as a portion of income influences price elasticity. Which of the following is true

Rock melon has a price of elasticity of demand of (-)2.95, it can be concluded that the demand for rock melons is ___________.

The discovery of a new hybrid wheat would tend to increase the supply of wheat. Under what conditions would wheat farmers realise an increase in revenue?

Shoes are priced at $75 per pair. A vendor sells 20 pairs per day. The vendor explores selling at $100 per pair. At that price, the vendor sells 15 pairs over the day. What is the elasticity of shoe sales to price.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单