An accountant increases the price he charges for his services by 66 percent. In response, the demand for his services decreases by 1818 percent. Will the accountant's revenue from his accounting services increase, decrease, or remain unchanged?

Question

Marley Cooke

Business

24 September, 03:08

An accountant increases the price he charges for his services by 66 percent. In response, the demand for his services decreases by 1818 percent. Will the accountant's revenue from his accounting services increase, decrease, or remain unchanged?

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Answers (1)

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Armando Joseph · Answer 1

Decrease

Explanation:

The accountant's revenue will decrease because the demand for his services has fallen by 1,818%, while the price he charges has only gone up by 66%.

The rise in prices will not be enough to cover the losses for such a deep fall in demand.

For example, suppose that before, the accountat used to complete 200 services a month for $100 per year, his total revenue is = 200 x $100 = $20,000.

Now, he will charge 68% more, the new service fee is $168, but demand for his services will now be a negative 3436 (200 x 1,818% = 3636), so his revenue will be 0, or even, negative (he could get into debt to afford his expenses).