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JAMB Economics 2004 Question 36

Question 36

Elasticity

In order to increase revenue, the seller of a commodity whose demand is fairly elastic is advised to

  1. A.increase price
  2. B.reduce output
  3. C.reduce price
  4. D.retain price
Show the answer and explanation

Answer: C (reduce price)

Explanation

With elastic demand, a price cut raises quantity sold by a larger proportion, so total revenue rises.