2. Revenue and Price Elasticity of Demand
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6 Terms
1
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How do you calculate PED?
% change in QD / % change in price
2
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What should a firm do if PED is elastic?
Put their prices down.
3
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What should a firm do if PED is inelastic?
Put their prices up.
4
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What type of firm does PED apply to? Why?
Price makers - they have the ability to set their own prices.
5
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Draw a marginal/ average revenue curve for a price making firm with PED.
6
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What happens when marginal revenue drops below 0?
Total revenue falls as the firm sells extra units, therefore it must align with the highest point on the total revenue curve.
Note 
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