Question

can someone caluclate the revenue and tell me if its smart to change price for 5 dollars higher than old price? is it going up or down? or stays same?

4) Your friend is a publisher. He tells you that if he raises the price of a book for 5 dollars (so the new price is 5 dollars higher than the old price), then his sales decrease for 100 copies (so the new sales is 100 copies fewer than old sales). He wants to know what happens to his revenue (goes up, goes down or stay the same), if he actually does this price change. What is your suggestion to him?

Answer 1

4) In this question, we do not need to calculate the revenue after the change in price. This question is based on the concept of elasticity.

We can suggest that if the percentage change in quantity demanded of the book due to the decrease in sales for 100 copies is less than the percentage increase in price due to the increase in the prices by $5, concludes that the demand for the book is relatively inelastic and hence, an increase in price of the book will increase the total revenue.

If the percentage change in quantity demanded of the book due to the decrease in sales for 100 copies is more than the percentage increase in price due to the increase in the prices by $5, concludes that the demand for the book is relatively elastic and hence, an increase in price of the book will decrease the total revenue.

If the percentage change in quantity demanded of the book due to the decrease in sales for 100 copies is equal to the percentage increase in price due to the increase in the prices by $5, concludes that the demand for the book is unit elastic and hence, an increase in price of the book will not affect the total revenue.

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