Studied by 0 people
Looks like no one added any tags here yet for you.
Total Revenue
total value of sales of a good or service. TR = price x quantity
Price Effect
when price increases, each unit sells for a higher price, which positively affects total revenue
quantity effect
when price increases, fewer units are sold (law of demand), which negatively affects total revenue
if demand is elastic..
the quantity effect will be stronger than the price effect
if demand is inelastic..
the price effect will be stronger than the quantity effect
if demand is unit-elastic..
the price effect will be equal to the quantity effect
price increases, elastic
TR decreases
price decreases, elastic
TR increases
price increases, inelastic
TR increases
price decreases, inelastic
TR decreases
