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What happens when a firm raises its price in a market in which the price is in the inelastic range of the demand curve?
When a firm raises its price in a market where demand is inelastic, total revenue typically increases. This is because the percentage decrease in quantity demanded is smaller than the percentage increase in price, leading to higher overall sales revenue. Consumers are less sensitive to price changes for inelastic goods, often resulting in sustained or increased sales despite the higher price. Consequently, the firm benefits from increased revenue without significantly reducing the quantity sold.
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What does it mean the demand for a product is inelastic?
When the demand for a product is inelastic, the product has no close substitutes and can't be easily replaced. Therefore, when the price of the product raises, people buy roughly the same amount of the product because they need it too much. This is in comparison to an elastic demand, where people will buy less of a product when it becomes more expensive.
What happens when demand of a good Increases?
Given supply, if demand of any good increases it raises the prices of the good.
What is the conventional model devised for studying the oligopoly market structure on the kinked demand curve explain the essential elements of this model?
The kinked demand curve model explains oligopoly pricing behavior by illustrating how firms react to competitors' price changes. In this model, the demand curve is kinked at the current market price: if a firm raises its price, it loses customers to competitors (indicating elastic demand); if it lowers its price, competitors will also lower theirs, leading to minimal gain in market share (indicating inelastic demand). This creates a price rigidity where firms are reluctant to change prices, resulting in stable prices despite changes in costs. The essential elements include the kinked demand curve, the asymmetric response of firms to price changes, and the resulting price stability in the market.
How elasticity of demand effect managerial decisions?
Elasticity of demand measures how much demand for a product will change if the price of that product is changed. Something highly elastic will be greatly affected by price changes (something like a hotdog for example, if a vendor raises his price then demand will drop because people can go elsewhere-demand is elastic). So management must be aware of how consumers will react to price changes. Normally, lowering the price of a good will bring in more customers if the demand for that good is elastic. If it is inelastic, then a lower price will not increase demand much.
Explain each determinant of demand and supply?
Determinants of demand include consumer preferences, income levels, prices of related goods (substitutes and complements), future expectations, and the number of buyers. An increase in consumer income generally raises demand for normal goods, while a decrease raises demand for inferior goods. On the supply side, determinants include production costs, technology, number of sellers, government policies (taxes and subsidies), and future expectations. Changes in these factors can shift the supply curve, impacting the overall market equilibrium.
What does it mean the demand for a product is inelastic?
When the demand for a product is inelastic, the product has no close substitutes and can't be easily replaced. Therefore, when the price of the product raises, people buy roughly the same amount of the product because they need it too much. This is in comparison to an elastic demand, where people will buy less of a product when it becomes more expensive.
What happens when demand of a good Increases?
Given supply, if demand of any good increases it raises the prices of the good.
What is the conventional model devised for studying the oligopoly market structure on the kinked demand curve explain the essential elements of this model?
The kinked demand curve model explains oligopoly pricing behavior by illustrating how firms react to competitors' price changes. In this model, the demand curve is kinked at the current market price: if a firm raises its price, it loses customers to competitors (indicating elastic demand); if it lowers its price, competitors will also lower theirs, leading to minimal gain in market share (indicating inelastic demand). This creates a price rigidity where firms are reluctant to change prices, resulting in stable prices despite changes in costs. The essential elements include the kinked demand curve, the asymmetric response of firms to price changes, and the resulting price stability in the market.
How inelastic demand has implications for pharmaceutical company price setting and revenue?
Inelastic demand for pharmaceuticals means that consumers are less sensitive to price changes; they will continue to purchase medications even if prices rise. This allows pharmaceutical companies to set higher prices without significantly reducing sales volumes, potentially leading to increased revenue. However, it also raises ethical concerns about access to essential medications and can lead to scrutiny from regulators and the public. Consequently, while inelastic demand enhances profitability, it also necessitates careful consideration of pricing strategies and their broader societal impact.
If a company raises its price for holidays over the equilibrium price the demand will?
if a company raises its price for holidays over the equilibrium price, the demand will
If a stock has a beta of 1.2 what does that mean?
If market rises by 100% then the stock rises by 120%
How elasticity of demand effect managerial decisions?
Elasticity of demand measures how much demand for a product will change if the price of that product is changed. Something highly elastic will be greatly affected by price changes (something like a hotdog for example, if a vendor raises his price then demand will drop because people can go elsewhere-demand is elastic). So management must be aware of how consumers will react to price changes. Normally, lowering the price of a good will bring in more customers if the demand for that good is elastic. If it is inelastic, then a lower price will not increase demand much.
Explain each determinant of demand and supply?
Determinants of demand include consumer preferences, income levels, prices of related goods (substitutes and complements), future expectations, and the number of buyers. An increase in consumer income generally raises demand for normal goods, while a decrease raises demand for inferior goods. On the supply side, determinants include production costs, technology, number of sellers, government policies (taxes and subsidies), and future expectations. Changes in these factors can shift the supply curve, impacting the overall market equilibrium.
What happens if bread raises too long?
nothing
What happens when government raises the minimum wage above market levels?
When the minimum wage is above the market levels, people undergo loss of work as companies tend to hire less. This in turn affects the economy of the country and the unemployment rate shoots up.
What happens to our heart rate when you undergo vigorous exercise?
it raises
What happens if a video store raises the price of a rental?
it will lose revenue
