Question 25 If the goal is to increase profits, a firm facing an inelastic demand should do what to their prices? araise themblower themcnot change them, as revenues will already be at a maximumdOne cannot tell with more information.

Answered: If the goal is to increase profits, a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 25

If the goal is to increase profits, a firm facing an inelastic demand should do what to their prices?

raise them

lower them

not change them, as revenues will already be at a maximum

One cannot tell with more information.

Expert Solution

Step 1

Introduction

Since the degree of the quantity demand's responsiveness to a change in the price level can be measured, this term is also known as the "elasticity of demand."

Demand elasticity at a given price equals the ratio of the amount demanded to the price change.

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