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Jacky Chong - revenue if the PED of her product is more...

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Jacky Chong, Block 1, p. 63 – 2, 5 2. To increase the revenue of her company, she can adjust the price of her products. When adjusting, she needs the knowledge of price elasticity of demand. If the PED of her product is less than 1, which is inelastic, and she decrease the price of her product, she will have a loss in her total revenue. If the PED of her product is more than 1, which is elastic, and she increase the price of her product, she will also have a loss in her total revenue. Knowledge of price elasticity of demand tells her that if the PED of her product is less than 1, which is inelastic, she should increase the price of her product for raising her company’s total
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Unformatted text preview: revenue; if the PED of her product is more than 1, which is elastic, she should decrease the price of her product for raising her company’s total revenue. 5. Necessity goods have low income elasticity, their demand will change very little if income rises, like salt. Normal goods have positive income elasticity, because normally for most goods, as income rises, the demand for the product will also rise. But inferior goods are different, because for inferior goods, the demand decreases as income increase, for example, the demand of cheep t-shirts falls as income rises because people switch to buying branded t-shirts....
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