HOw do we increase revenue using the concepts of elasticities?

Question

Note: If u r Mr Gobi, do not look.

We're hopeless economics students with a deadline we cannot possibly hope to meet, should we be left with this assignments on our own. For our sakes, and for the sake of the whole class, please, we humbly beg you...GIVE US THE ANSWERS.

Thank you.

Answer 1

You use Price elasticity of demand.

The simple basics is if you know a product is price inelastic it means that you know that demand doesn't change as much as you jack up the price (like short term gas prices) SO, to increase revenue, you can do exactly that. Jack up the price and you get more revenue as people continue to buy even at higher prices.

But if you know a product is price elastic, it means that people stop buying your product when you raise the price. So you better not raise prices, because you will loose more money because you sold less, than you gained by raising the price.

Read the link if you need more detail.