Question

Price	Quantity Demanded
$100	100
$90	120
$80	150
$70	210
$60	250

Refer to the table above. The firm is considering raising its price to $80. If it does so,

its total revenue will increase, because the percent increase in price is greater than the percent decrease in quantity demanded.

its total revenue will increase, because the percent increase in price is less than the percent decrease in quantity demanded.

its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded.

its total revenue will decrease, because the percent increase in price is greater than the percent decrease in quantity demanded.

Refer to the table above. If the firm charges a price of $70, its total revenue equals

$700.

$1,700.

$12,000.

$14,700.

Answer 1

1. Ans: its total revenue will decrease, because the percent increase in price is less than the percent decrease in quantity demanded.

Explanation:

If the percent increase in price is less than the percent decrease in quantity demanded then the value of price elasticity of demand will be elastic ( E_d > 1). If demand for a good is elastic then increase in price will lead decrease in total revenue.

PED = % change in quantity demanded / % change in price

2. Ans: $14,700

Explanation:

Total revenue = Price * Quantity

= $70 *210

= $14,700