Question

Which of the following firms could raise prices and expect an increase in revenues?

a. a firm whose product has an elasticity of 1
b. a firm whose product has an elasticity of 0.31
c. all firms regardless of the elasticity of their products
d. a firm whose product has an elasticity of 3.1

Answer 1

a firm whose product has an elasticity of 0.31

Step-by-step explanation:

it's on gradpoint :)

Answer 2

b. a firm whose product has an elasticity of 0.31

Step-by-step explanation:

A type of product that has elasticity less than 1 is considered as 'inelsatic goods. Inelastic goods would not have a decrease in demand even if they are increasing the price of their product.

This means that when the producer of this product increase the price, their profit will either stay stagnant or increase.

In most cases, products that are very crucial to fulfill our basic needs or day to day activity have this type of elasticity.

Example : Water and Gasoline,