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When the price elasticity of demand is infinite, it means that consumers will buy any quantity of a good at a specific price, but will not purchase any at a higher price. In this case, the revenue generated remains constant at the set price, as any increase in price leads to a complete drop in quantity demanded. Therefore, total revenue is maximized at that particular price, regardless of how much quantity is supplied, as long as the price does not change.

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2mo ago

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Related Questions

How does elasticity of demand influence tax revenue?

Elasticity of demand influenced tax revenues


How to use the concept of price elasticity of demand to maximize revenue?

Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.


What is the relationship between price elasticity of demand and the monopolist's revenue?

marginal revenue is negative where demand is inelastic


How revenue method applied in calculating price elasticity of demand?

abc


Conclusion of price elasticity of demand?

The conclusion of the price of elasticity of demand is the effect of price change based on the revenue it receives. It is based off the demand of the product and the price of the product.


Does the change in revenue link to the price elasticity of demand in any way?

not really


Is it always true When demand elasticity is equal to -1 marginal revenue is equal to 0?

Yes, when demand elasticity is equal to -1 (unitary elasticity), marginal revenue is indeed equal to 0. This occurs because, at this point, any change in quantity sold does not affect total revenue; increases or decreases in quantity will offset price changes, resulting in no net change in revenue. Thus, when elasticity is -1, the firm maximizes total revenue, leading to marginal revenue being zero.


What is Elasticity of demand in steel industry?

Elasticity of demand in the steel industry is inelastic. The price of steel can fluctuate and the demand will remain constant. As a result, as price moves, revenue will move in the same direction.


What happens to the price if supply increases?

If the cost of supply falls for each unit of supply (a shift of the supply curve right), the change in price depends on the price elasticity of demand: Price is unchanged when price elasticity of demand is infinite. Price falls when price elasticity of demand is less than infinite.


What questions is the price elasticity of demand designed to answer?

Price elasticity of demand is used to determine how changes in price will effect total revenue. If demand is elastic(>1) a change in price will result in the opposite change in total revenue.(+P=-TR) When demand is unit elastic(=1) a change in price wont change total revenue. If demand is inelastic a change in price will result in a change in total revenue in the same direction.(+P=+TR)


Why is the concept of price elasticity of demand potentially very uesful to a businss?

It can be used to calculate quantity sold to optimise profit, since the price elasticity of demand, multiplied by revenue, describes the total change in revenue (MR) per unit sold.


What is the connection between elasticity and total reveneu?

The connection between elasticity and total revenue lies in how changes in price affect consumer demand. When demand is elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, resulting in higher total revenue. Conversely, if demand is inelastic, a price decrease results in a smaller increase in quantity demanded, causing total revenue to decline. Therefore, understanding the price elasticity of demand helps businesses optimize pricing strategies to maximize total revenue.