Question

Which of the following statements regarding price elasticity of demand is true? O The revenue for a product's sales is maximized where price elasticity = -1 because this is where changes in unit sales and unit price exactly offset each other O The revenue for a product's sales is maximized where price elasticity= -1 because this is where the quantity sales and market share are maximized O The revenue for a product's sales is maximized where price elasticity is less than -1 in absolute value (price inelastic) because that is where the producer can raise the price without losing unit sales

Answer 1

Ans:

Explanation:

Revenue = PQ

Applying logarithms, we get:

ln(R) = ln(P) + ln(Q)

To maximize revenue:

Differentiating with respect to ln(P) and equating to zero, we get:

1 + Elasticity = 0

Elasticity = - 1.

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