Total Revenue and Determinants

# Total Revenue and Determinants - Total Revenue and...

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Total Revenue and Determinants 23 Predicting Total Revenue Responses to Price Changes !"#\$%&'%()*+,'-.*/#0#(1#*/#23,(2#2*',*!"%&#*45-()#2 Knowledge of the price elasticity of demand is 6(,7.#\$)#*,8*'5#*3"%&#*#.-2'%&%'9*,8*\$#:-(\$*%2*#;'"#:#.9 e%:3,"'-('* important for predicting how total revenue %( xtremely 8,"* 3"#\$%&'%()* 5,7* ','-.* "#0#(1#* &5-()#2* c"#23,(2#*',*3"%&#*&5-()#2< changes. hanges in response to price = ?.-2'%&*@?\$*>*ABC **DE *** *ADE* A = BE > BE > > ADE****+/*8-..2 =DE***+/*"%2#2 F(%'*?.-2'%&*@?\$*>*ADC *DE****A DE > ADE***=***DE > *GE****+/*(,*&5-()# *GE **+/*(,*&5-()# =DIBE**+/*"%2#2 ADIBE**+/*8-..2 H(#.-2'%&*@?\$*>*ADIBC *DE*****A ***DIBE > **** ADE****= ***DIBE > Determinants of Price Elasticity of Demand 1. Availability and price of substitutes. The greater the availability of substitutes, the more elastic is demand. (Salt; Coca Cola) 2. Percent of Consumer's Budget The higher the fraction of the consumer's budget spent on the good, the greater is the elasticity of demand. 3. Time The longer the time period, the more elastic is the demand for the product. (Gasoline) © Bryan L. Boulier, 2010. All rights reserved. ...
View Full Document

## This note was uploaded on 02/17/2011 for the course ECON 101 taught by Professor Fon during the Spring '06 term at GWU.

Ask a homework question - tutors are online