Economic (Example)

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Price Elasticity of Demand and Total Revenue Students’ Name Course Number Date Price Elasticity of Demand and Total Revenue The phrase “price elasticity of demand” is used to refer to the rate of change in the number of products in demand from a rate of increase in their prices. Price elasticity of demand=p dXXdP According to Boardman et al. “the price elasticity of demand is the ratio of percentage change in demand to the percentage change in price” (Boardman et al. 2017). Therefore when the ratio is higher than one then there is price elasticity and thus the reduction in demand with an increase in price. Similarly when the ratio is below one then the product demand remains constant with the price fluctuation. In such case the business may opt to hike the prices of the products to avoid the impact of the reduction in the volume of sales. to produce sufficient products due to irregular price elasticities. Both producers and consumers then begin to suffer the consequences of external exploitation of external companies. As a result the price elasticities become more inelastic in most regions leading to a reduction in total revenue of most of the companies. Government factors and market imperfections are the primary causes of economic underdevelopment in most developing countries if the tax systems policies and market failures are out of order. References Boardman A. Greenberg D. Vining A. & Weimer D. (2017). Cost-benefit analysis. Cambridge: University Press. Guven S. & McPhai M. (2013). Beyond the Cost Model: Understanding Price Elasticity and Its Applications. Casact.org. Retrieved 28 March 2018 from www.casact.org Hirschey M. (2016). Managerial Economics. London: Cengage Learning EMEA. Stiglitz J. & Rosengard J. (2015). Economics of the public sector (4th ed.). New York [u.a.]: Norton. Varian H. (2014). Intermediate microeconomics: A Modern Approach (7th ed.). New York NY [u.a.]: Norton. [...]

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