price elasticity
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Problem 1: should a company raise its price when it faces and elastic demand? Explain.
Problem 2: Given a price elasticity, what price change would be needed to increase quantity demanded by a certain amount?
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This solution helps with problems regarding price elasticity.
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1. No
Assuming you know what elasticity is, the follows are rules,
-if the demand is inelastic, the firm can increase revenue by increasing price (because demand is inelastic, less people will decide not to use this service/good, while most would stick with it and ...
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