Answer to Question #16910 in Microeconomics for capitalboy

Question #16910
In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is −1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?
1
Expert's answer
2012-10-24T10:45:31-0400
Total revenue change = 4% * (- 1.5) = - 6%
Change in advertising = 11% * 0.6 = 6.6%
So, total revenue will decrease because of advertising increase.

Answer: total revenue will decrease.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS