2.9 Describe what will happen to total revenue in the follow- d. Price increases and demand is inelastic. e. Price increases and demand is unitary elastic. f. Price decreases and demand is perfectly inelastic.

2.9 Describe what will happen to total revenue in the follow- d. Price increases and demand is inelastic. e. Price increases and demand is unitary elastic. f. Price decreases and demand is perfectly inelastic.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 1SCQ: From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand...

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Question

2.9 Describe what will happen to total revenue in the follow-
d. Price increases and demand is inelastic.
e. Price increases and demand is unitary elastic.
f. Price decreases and demand is perfectly inelastic.
g. Price increases and demand is perfectly elastic.

Expert Solution

Step

We know that the revenue function as a function of price is $R (p) = p Q$

and the relationship between revenue and elasticity is:

$\frac{d R}{d p} = Q (1 - |E|)$

Where E denotes price elasticity and p denotes price.

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