How does Residential water demand elasticity impact Water Utility revenues? a. Water utility revenues are covered by the...

Question

Question

How does Residential water demand elasticity impact Water Utility revenues?

a. Water utility revenues are covered by the federal subsidies

b. The higher the elasticity, the less revenue from raising the price of water

c. The lower the elasticity, the less revenue from raising the price of water

d. The higher the elasticity, the more revenue from raising the price of water

Answer 1

Answer #1

Answer

Option b

b. The higher the elasticity, the less revenue from raising the price of water

revenue is maximum at the unit elasticity of demand. The increase in price at the inelastic demand increases revenue and vice verse.

Also, a decrease in price at elastic demand increases revenue and vice verse.

Answer 2

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