Why profit maximized when demand is elastic and revenue is maximized when demand is unit elastic leading the price of profit-maximizing higher than revenue-maximizing? Explain your answer by a graph.
With elastic demand as price increases,it will reduce the quantity sold .This in turn will lead to fall in revenue.Maximum profits can be attained at a point which will be more than or equal to the price that maximizes revenue . At a point where elasticity is unit elastic, revenue is maximized. This is because if demand is elastic and price is decreased , quantity sold will increase and revenue obtained will be more than the revenue lost from low prices.Here quantity effect is more than price effect.If demand is inelastic and price increases ,quantity sold will decrease but revenue earned from higher prices will be more.Here price effect is more than quantity effect.
Why profit maximized when demand is elastic and revenue is maximized when demand is unit elastic...
explain why revenue is maximized when price elasticity of demand is 1 (one)? I have searched about this, and it seems to me that at unity elastic demand as the price change there will be the same percentage change in demand thus the revenue will not change, so how the above question asking this question regards
Profits will always be maximized when total revenue equals total cost =T or F If marginal revenue for an extra unit is positive, then selling the extra unit causes total revenue to rise. T or F Given a downward-sloping demand curve and positive marginal costs, profit-maximizing firms will always sell less output at higher prices than will revenue-maximizing firms. T or F Marginal profit is the difference between marginal revenue and marginal cost, and will always equal zero at the...
When demand is ________, a decrease in price ________ total revenue. unit elastic; increases elastic; does not change elastic; decreases inelastic; decreases
When prices decrease, total revenue O A. rises when demand is price elastic. O B. falls when demand is unit elastic O C. rises when demand is price inelastic O D. falls when demand is price elastic.
Price and marginal revenue (dollars per bottle) The graph shows Minnie's demand curve and marginal revenue curve. At what price is Minnie's total revenue maximized and over what price range is the demand for water elastic? Why will Minnie not produce a quantity at which the market demand is inelastic? a Minnie's total revenue is maximized at a price of $ bottle. 56 The demand for water from Minnie's is elastic between the prices of a bottle. O A. zero...
1)Explain what it means when demand is inelastic? 2) If demand is elastic, total revenue will increase when the price decreases? True or False? 3) The price elasticity of supply will be a smaller number when it is relatively easy for sellers to increase their supply. ( True or False)? 4) Demand is more elastic when the absolute value of the price elasticity of demand is larger. ( True or False)? 5) If the quantity demanded of one good increases...
Define the terms elastic, inelastic, and unit elastic. Explain why a team maximiz- ing revenue would always operate at the point of unit elasticity on their demand curve
3. Profit maximization using total cost and total revenue curves Suppose Darnell runs a small business that manufactures frying pans. Assume that the market for frying pans is a competitive market, and the market price is $20 per frying pan. The following graph shows Darnell's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for frying pans quantities zero through seven (inclusive) that Darnell produces.QUANTITY . TOTAL COST01011522033044557061007135 Calculate Darnell's marginal...
The profit of a firm is maximized when: marginal cost is minimum. marginal revenue is less than marginal cost. marginal revenue is equal to marginal cost. marginal revenue is maximum. marginal revenue is greater than marginal cost.
For any given tax, the revenue generated is: larger in markets with price-elastic demand and supply. smaller in markets with price-elastic demand and supply. always maximized in markets with price-elastic demand and supply. the same regardless of price elasticity.