ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -We can thus divide the demand curve into two parts, as in Figure 6.13 “Marginal Revenue and the Elasticity of Demand". At low quantities and high prices, a firm can increase its revenues by moving down the demand curve-to lower prices and higher output. Marginal revenue is positive.

Detailed explanation-2: -A price increase will therefore increase total revenue while a price decrease will decrease total revenue. Finally, when the percentage change in quantity demanded is equal to the percentage change in price, demand is said to be unit elastic.

Detailed explanation-3: -Higher prices do not always lead to higher profits for a business. When prices change, a company must consider the economics concept called elasticity to determine the true impact of the change on total revenue. Therefore, a change in price can either cause total revenue for the company to increase or decrease.

Detailed explanation-4: -finding new customers. selling more to existing customers. offering sale promotions to boost the volume of sales. developing new product or service lines.

Detailed explanation-5: -When you increase price, you increase revenue on units sold (The Price Effect). When you increase price, you sell fewer units (The Quantity Effect).