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Elasticity

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Revenue at Palm was $1.4 billion for the nine months ending March 2, up 97% for the same period last year. Management attributes the increase in revenues to a 137% increase in PDA shipments, despite a 17% drop in the average blended selling price of Palm's line of PDA's. Given this, is it surprising that Palm's revenue increased when it decreased the average selling price of it's PDA's? Explain.

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This is not at all surprising. As per the concept of Elasticity, a drop in selling price will lead to a increase in demand of Palms. As the statement says that the shipments increased by 137%, with a ...

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