Answer:
increase
decrease
Explanation:
Price elasticity of demand is the degree of responsiveness of demand to a change in price.
Elastic demand
If a a given change in price leads to a more than proportional change in quantity demanded, we say that the demand is price elastic. So a decrease in price of the product will increase revenue and vice versa.
Inelastic demand
If a given change in price price leads to a less than proportionate change in quantity demanded, we say that the demand is price inelastic. So a decrease in price we decrease revenue
Answer:
if the demand curve is elastic and the price of a computer decreases, we expect total revenue to INCREASE. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to DECREASE.
Explanation:
Price elasticity of demand measures how a 1% change in price affects the quantity demanded of a product or service.
We can use an example to explain how PED affects total revenue:
PED = 1.5
price = $100 and 100 units are sold
total revenue = 100 x $100 = $10,000
price decreases by 20%, so quantity demanded increases by 1.5 x 20% = 30%
so now, price = $80 and 130 units are sold
total revenue = $80 x 130 = $10,400, total revenue increased
another example, PED = 0.5
price = $100 and 100 units are sold
total revenue = 100 x $100 = $10,000
price decreases by 20%, so quantity demanded increases by 0.5 x 20% = 10%
so now, price = $80 and 110 units are sold
total revenue = $80 x 110 = $8,800, total revenue decreased
