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Revenue at a Major Cell Manufacturer

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

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Solution Summary

The solution examines the increase in revenue gained from decreasing the average selling price of cell phones in 422 words.

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Revenue at a major cellular telephone manufacturer was $1.4 billion for the nine months ending March 2, up 97 percent over revenues for the same period last year. Management attributes the increase in revenues to a 137 percent increase in shipments, despite a 17 percent drop in the average blended selling price of its line of phones. Given this information, is it surprising that the company's revenue increased when it decreased the average selling price of its phones? Explain.
For this we need to understand the relationship between quantity demanded and price. As per csun.edu, "Demand is the relationship between the price of a good and the quantity of the good that consumers ...

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