ECON 1050 Chapter 4: Economics-1 (1) (dragged) 3

• School: University of Guelph
• Department: Economics
• Course: ECON 1050
• Professor: Eveline Adomait

Document Summary

3. the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same. ) If a price cut increases total revenue, demand is elastic. If a price cut decreases total revenue, demand is inelastic. If a price cut leaves total revenue unchanged, demand is unit elastic. In figure a , it shows the relationship between elasticity of demand and total revenue, As the price of a pizza falls from to . 50, the quantity demanded increases from 0 to 25 pizzas an hour. At . 50 a pizza, demand is unit elastic and total revenue stops increasing. As the price of a pizza falls from . 50 to zero, the quantity demanded increases from 25 to 50 pizzas an hour. In figure b, as the quantity increases from 0 to 25 pizzas an hour, demand is elastic, and total revenue increases.