Question 19
ElasticityIn order to maximize his profit, a businessman who faces a very elastic demand for his products is advised to
- A.slightly increase the price of his products
- B.slightly reduce the price of his products
- C.leave his prices unchanged
- D.discriminate his prices.
Show the answer and explanation
Answer: B (slightly reduce the price of his products)
Explanation
With elastic demand, a small price cut raises quantity sold by a bigger percentage, so total revenue rises.