ASTALAVISTA! Why Is Elasticity 1 At Revenue Maximizing Price
On the other hand an increase in price. Both revenue and profit will fall with price decreases. Pdf Making Price Elasticity A Useful Metric For Maximizing Profit In the red part of the curve prices are below the revenue-maximizing price. Why is elasticity 1 at revenue maximizing price . Price elasticity relates with total revenue gained when price increases or decreases. B Price elasticity of the demand is known to be -25 and the firm lowers the prices by 5. Revenue Versus Profit Considerations. If elasticity is 1 the total revenue is already maximized and you would advise that the company maintain its current price level. And at that price the elasticity of demand is exactly 1. If the elasticity is greater than 1 it means a larger change in quantity for a smaller change in price so lowering the price raises profits. This formula only works if demand is elastic. C Price elasticity of the demand is known to be 1 and the firm raises the prices by 1. 2 MC 1 2 MC 1 2 ...