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(Q) The price elasticity of demand for a product at its current price level is inelastic. What will
happen to the total revenue and the profit if the price of the product is reduced?Total revenue (FALL)
Profit (FALL)
——————————————————————————————————-Hello tutor!!
My question is that in the explanation they are saying profit will FALL because decrease in total revenue and INCREASE IN TOTAL COST.
I can’t understand how because of increase in the total cost profit would be fall.
I understand that why profit fall due to decrease in revenue but not understanding total cost point.Could you please explain me with an example please!!
Thank you!!
The total cost will not increase. The revenue will fall but the cost will stay the same, so the profit will fall.
(Q): Rotanola Co produces another phone with a price elasticity of demand equal to one.
Indicate, by selecting the relevant boxes in the table below, whether each of the following
statements are true or false.1) Demand will remain constant despite price changes. (FALSE)
2) If price increases by 5%, demand will fall by 10%. (FALSE)
3) Total expenditure will remain constant despite price changes. (TRUE)
—————————————————————————————————Tutor here is one more question in kit related to pricing.
In statement 3 they said it is TRUE but I did not understand how ??
I marked FALSE in all 3 statements but 3rd statement is TRUE i am not understanding it how could you please explain me with an example ?Oh dear. BPP has made a mess of one or two of these pricing questions (have you checked their website to see if there is an errata sheet?).
Statement 3 is false. If the price changes then the demand will also change. If the demand changes then the production changes and therefore the total expenditure will change.
Thank you sir for clearing my doubt.
I have checked BPP errata sheets but they didn’t mention anywhere about these two mistakes of pricing question. But it’s okay.
Thanks once again!!
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