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elastic
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Is the aggregate demand for goods and services inversely related to the price level?
yes
What is The Total Revenue Rule?
if a price cut decreases 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.
Why does equilibrium price increase with increase in demand even when the price and demand are inversely related?
Equilibrium price increases with an increase in demand because, in a market, demand and supply interact to determine price. When demand rises, consumers are willing to pay more for the same quantity of goods, leading to upward pressure on prices. This shift in demand causes suppliers to respond by increasing their prices to balance the higher willingness to pay, thus resulting in a new equilibrium with a higher price. Therefore, while price and quantity demanded are inversely related, the overall market equilibrium reflects the increased demand.
Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
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.
Is the aggregate demand for goods and services inversely related to the price level?
yes
What is The Total Revenue Rule?
if a price cut decreases 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.
What is an example of inversely related?
An example of two variables that are inversely related is the price of a product and the quantity demanded by consumers. As the price of a product increases, the quantity demanded by consumers typically decreases, and vice versa. This relationship is described by the law of demand in economics.
Why does equilibrium price increase with increase in demand even when the price and demand are inversely related?
Equilibrium price increases with an increase in demand because, in a market, demand and supply interact to determine price. When demand rises, consumers are willing to pay more for the same quantity of goods, leading to upward pressure on prices. This shift in demand causes suppliers to respond by increasing their prices to balance the higher willingness to pay, thus resulting in a new equilibrium with a higher price. Therefore, while price and quantity demanded are inversely related, the overall market equilibrium reflects the increased demand.
Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
Why is there an inverse relationship between demand and price?
If something is in high demand but there is a limited supply of it then the price goes up. Kinda of like the price of gasoline. There isn't a limited supply and alot alot of people need it for their cars and other things etc so it drives the price. If there isn't a high demand for it then the price is generally reasonable. They are inversely related. Directly related is supply and demand.
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.
Why price and quantity demanded are inversely related?
Price is inversely related to quantity demanded because as price rises, consumers substitute other goods whose price has not risen.
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)
What is the relationship between price elasticity of demand and the monopolist's revenue?
marginal revenue is negative where demand is inelastic
Why is aggregate supply related to the price level?
This is in accordance to the Demand & Supply Theory... When the demand for a product is high and its supply is low, this usually causes the price of that commodity to increase Similarly when supply for a product is high and the demand for that product is low, it causes the price of that product to decrease. Hence the supply is inversely related to the price of any product (Provided the Demand is in accordance to the two points mentioned above)
How does a change in price on a linear demand curve affect total revenue?
on the linear demand curve, demand is elastic at price above the point of unitary elasticity so a price increase will decrease the total revenue.
