Elasticity If you have a product with a midpoint elasticity of 1.25, then what w

Question

Elasticity If you have a product with a midpoint elasticity of 1.25, then what will be your best pricing strategy? Multiple Choice You must try to lower the price to earn more total revenue. This will aso get you more customers Just find out what your total costs are and add a profit margin of 20 percent Your best pricing strategy is to charge the same prices as your competition the price to eam more total revenue even if that means losing a few of your customers ?Prev 70, 201a Next? MacBook Air 80 888 F7 3 4 5 7

Explanation / Answer

Ans is A

Since demand is elastic. i.e. Ed=1.25

Due to elastic demand, there is an inverse relation between price and Total revenue. Thus decrease in price will increase quantity demanded by more proportionate leading to increase in revenue.

Thus ans is A

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