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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Price elasticity
hello sir.
When Demand for certain product is inelastic we should increase the Selling price right?
So Revenue will increase because of the SP only. The quantity demanded will not change right? Or it will fall because we increased the Price and Demand should fall as well…confused whether its exception or not.
But my question is “does The standard rule always apply no matter of elasticity or any other factor” as for the rule of “when we increase price demand will fall and when we reduce price demand will rise”? Or there are some cases when its doesnt.
If demand is inelastic then we can increase the selling price without the demand falling. Therefore me will get more revenue and make more profit.
(However elasticity changes at different prices, so as we increase the price there is likely to come a time when it stops being inelastic and then increasing the price will result in lower demand.)