According to the law of demand, if price increases, quantity demanded of a good or service will decrease or vice versa. Price elasticity of demand tell us how much quantity demanded will decrease when price increases or how much quantity demanded will increase if price decreases.
On the other hand, according to the law of supply, if the price increases, quantity supplied of a good or service will increase. Similarly, if price decreases, quantity supplied will decrease. The degree of sensitivity (responsiveness) of production/supply to a change in price is measured by the concept of price elasticity of supply.
Total revenue is find outd as the quantity of a good or service sold multiplied by its market price. This it is a measure of how much money a company makes from selling its product. The core objective of a firm is maximizing profit. One of the ways to maximize profit is increasing total revenue. The firm can increase its total revenue by selling more items or by raising the price. Among others, this depends on the nature of the price elasticity of demand. Moreover, the length of time is an important factor in determining price elasticity of demand and supply.
describe the relationship between the price elasticity of demand and total revenue. What are the impacts of various forms of elasticities (elastic, inelastic, unit elastic, etc.) on business decisions and strategies to maximize profit? describe using empirical exs?
Is the price elasticity of demand or supply more elastic over a shorter or a longer period of time? Why? Give exs.
What are the impacts of government and market imperfections (failures) on the price elasticities of demand and supply?