If the price elasticity of demand for apples is 3 , then what will be the impact on total revenue if price increases?

Choose 1 answer:
(A) Total revenue will increase
(B) Total revenue triples
(c) Total revenue will not change

D Total revenue will fall to zero
(E) Total revenue will decrease

Question

If the price elasticity of demand for apples is 3 , then what will be the impact on total revenue if price increases?

Choose 1 answer:
(A) Total revenue will increase
(B) Total revenue triples
(c) Total revenue will not change

D Total revenue will fall to zero
(E) Total revenue will decrease

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Price Elasticity of Demand: Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as $ ext{PED} = \frac{\% ext{ change in quantity demanded}}{\% ext{ change in price}} $. ‖ ‖ b ⋮ Given PED Value: The problem states that the price elasticity of demand for apples is 3. This means that for every 1% increase in price, the quantity demanded decreases by 3%. ‖ ‖ c ⋮ Impact on Total Revenue: Total revenue (TR) is calculated as $ ext{TR} = ext{Price} imes ext{Quantity} $. When demand is elastic (PED > 1), an increase in price leads to a proportionally larger decrease in quantity demanded, causing total revenue to decrease. ‖ ∻Answer∻ ⚹ (E) Total revenue will decrease ⚹ ∻Key Concept∻ ⚹ Price Elasticity of Demand (PED) ⚹ ∻Explanation∻ ⚹ When the price elasticity of demand is greater than 1 (elastic demand), an increase in price results in a larger percentage decrease in quantity demanded, leading to a decrease in total revenue. ⚹◊What formula can be used to calculate the impact of a price increase on total revenue given a price elasticity of demand of 3⍭ Generate me a similar question◊

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