Revenue is the amount of money a firm receives from selling its goods/services
Total revenue = price x quantity
The total revenue rule states that in order to maximise revenue, firms should increase the price of products that are inelastic in demand & decrease prices on products that are elastic in demand
This can be illustrated using a demand curve
Diagram Analysis
The demand curve is very elastic in this market
When a good/service is price elastic in demand, there is a greater than proportional increase in the quantity demanded to a decrease in price
Diagram -2
Diagram Analysis
The demand curve is very inelastic in this market
When a good/service is price inelastic in demand, there is a smaller than proportional decrease in the quantity demanded to an increase in price
What are the features of goods which are elastic?(3 or 4 features include)
What are the features of goods which are inelastic?