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1 February, 08:10

Suppose demand for a product is elastic at a given price. What will happen to the company's total revenue if it raises the price of that product? Why?

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  1. 1 February, 08:15
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    The elasticity or non-elasticity of the demand for a product depends on whether the demand for the product decreases or not with the price increase. If the increase in the price of the product causes an increase in revenue, then the demand is inelastic because demand does not depend on the price increase. If the increase in price causes a decrease in revenue, then demand is elastic, as the increase in price has an impact on quantity demanded.

    The answer: suppose demand for the product is elastic, and the company raises the price of the product, the revenues will be reduced.
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