Question

If the elasticity of demand for a company’s product is estimated to be 1.72, what would you advise the company to do if their objective is to decrease revenue?

Answer 1

Raise price

Step-by-step explanation:

Elasticity of demand refers to the responsiveness of quantity demanded with any change in the price level of the product.

Here, the elasticity of demand is 1.72 which indicates that the demand for the product is more elastic. This means that a slightly increase in prices would reduce the quantity demanded by the a larger amount.

Therefore, if this company wants to decrease its revenue then it should raise the price of the product which results in lower quantity demanded and hence, reduction in the revenues.