The price elasticity measure the response of quantity demanded as price changes, => it measure the percentage change in quantity demanded as price increases by 1%. For an elastic demand the percentage change in quantity demanded is more than percentage change in price, => if the producer reduces the price the total revenue from the sale of the good increases.
For an inelastic demand the percentage change in quantity demanded is less than percentage change in price, => if the producer increases the price the total revenue from the sale of the good increases.
Here the price elasticity of energy drink is elastic in nature, => if the producer decreases the price by 1% then quantity demanded will increase by more than 1%, => the producer should reduce the price in order to increase total revenue, that’s why the producer get back to the original special price of R40 for two cans.
Here in the above fig the initial price was P1=R25 and the corresponding revenue was TR1. As the price decrease to P2=R20 per unit the revenue increases to TR2.
GENERIC Y1 Economics X %20S PAR%20GROUP/Downloads/GENERIC%20Y1%20Economics%201A%20Final.pdf - + Fit to page Page view | (20 Marks)...
CASE 20 Enron: Not Accounting for the Future* INTRODUCTION Once upon a time, there was a gleaming office tower in Houston, Texas. In front of that gleaming tower was a giant "E" slowly revolving, flashing in the hot Texas sun. But in 2001, the Enron Corporation, which once ranked among the top Fortune 500 companies, would collapse under a mountain of debt that had been concealed through a complex scheme of off-balance-sheet partnerships. Forced to declare bankruptcy, the energy firm...