Econ, 3.9, Elasticity Revenue

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Total revenue equals

Price x Quantity

Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Sales revenue decreased.

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is

Elastic

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales. True or False

False

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic. True or False

False

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

Inelastic

Which of the following statements is true? -Whenever a firm raises its price its total revenue will increase. -Whenever a firm increases its quantity sold its revenue will increase. -Total revenue will equal zero when the demand for a product is unit elastic. -When a firm lowers its price its total revenue may either increase or decrease.

When a firm lowers its price its total revenue may either increase or decrease.

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be

inelastic

When demand is elastic, a fall in price causes total revenue to rise because

the increase in quantity sold is large enough to offset the lower price.

If the demand for a product is perfectly inelastic, a decrease in the price of the product

will decrease total revenue.


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