Managers should include price elasticity of demand in their decision making because a. price elasticity of...
Managers should include price elasticity of demand in their decision making because
a. price elasticity of demand indicates how total revenue is going to change based on a change in price
b. price elasticity of demand immediately predicts profit changes when changing prices.
c. when price elasticity of demand approaches 0, profit is minimized, regardless of a change in price.
d. price elasticity of demand indicates directly how supply should change given a change in price.
Homework Answers
a. price elasticity of demand is related to total revenue because price elasticity shows the change in quantity demanded due to change in price . And total revenue is percentage change in price plus percentage change in quantity demanded .
Percentage change in quantity is related to percentage change in price by elasticity so total revenue can be assessed by elasticity and percentage change in price alone. So option a) is correct.
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