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Price elasticity of demand - how does it affect total revenue?
You are the manager of Electro Electronix, a large corporate specialising in the sale of electronic equipment.
You have recently received a report indicating that the Price elasticity of demand for flat screen TV's is 1.6.
Explain the steps involved in pricing the television units in order to maximise total revenue.
1 Answer
- Anonymous1 decade agoFavorite Answer
I will reduce the price to increase the sale volume and more revenue. From the data,I know that if I reduce the price about 1%,the sale volume will increase 1.6%. I will keep doing so until the elasticity is equal to unit.At that point, my revenue will be maximized.Do I get a big bonus?