Tracey sells 100 gourmet cupcakes per day at $2 each. She is considering raising her price to $2.50 per cupcake in order to increase her revenues. If the price elasticity of demand for Tracey's cupcakes is 2, would she increase her revenues?

no, revenues would fall because she far fewer cupcakes.

Explanation:

given data

sells Q = 100

cupcakes per day P = $2 each

raising price P' = $2.50

price elasticity of demand e = 2

solution

when here e > 1, price and TR move in opposite direction.

when price is increase to $2.5, TR falls

when Q falls more than rise in P

so here no, revenues would fall because she far fewer cupcakes.