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Q: True or False
When sales demand is inelastic, a company can increase profits by raising the selling price of its productA: True
In circumstances of inelastic demand, prices should be increased because revenues will increase and total cost will be reduced (because quantities sold will be reduce———————
i understand that we can increase selling price and make more profit in the case of inelastic demand, because the demand is not affected by price.
what i dont understand is how will the costs be reduced as it says in the answer?thank you
If the price is increased, then the demand will fall.
Therefore they will produce less and therefore the total cost of production will be lower.
Ooops sorry – I didn’t read the question properly 🙁
The answer is indeed ‘true’ but the explanation is wrong. If demand is inelastic then they can increase the selling price without a loss of demand – therefore more profit.
thank you so much
im done with bpp …it has many mistakes
for the next paper im definitely using kaplanthank you so much sir
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