Explore BrainMass

Price Elasticity

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

High-Time, Inc. manufactures medium proceed plastic wrist watches. High-time is considering lowering the price of its watches from the current $14 per unit to $10 per unit. High-Time currently sells 18,500 units per month. The firm's marketing department estimates the price elasticity of demand to be -2.5 over this price range.

a. If High-Time lowers the price, will the total revenue increase, decrease, or remain unchanged? Why?

b. If High-Time lowers the price, what will be the new evel of quantity demanded? Of the new revenue?

© BrainMass Inc. brainmass.com September 24, 2018, 1:17 pm ad1c9bdddf - https://brainmass.com/economics/elasticity/examining-price-elasticity-115640

Solution Preview

a) as the price elasticity is in the elastic range (-2.5), by decreasing the price the the total revenue will increase. The decrease in price would ...

Solution Summary

Price Elasticity is examined in this case.