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(Solution document) Price is $60.


Can someone help me understand elasticity and inelasticity of demand and how it affects profit and revenues so that I can answer the following questions:


  1. Price is $60. The absolute value of price elasticity is 2, and marginal cost is $35. Would total revenue increase or decrease? Would profit increase or decrease?
  2. Now say the price elasticity is 3. Would total revenue increase or decrease? Would profit increase or decrease?

 







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