Elasticity, Total Revenue, and Optimal Pricing
The concept of elasticity can help managers make crucial decisions regarding the firm’s total revenue.
The following video discusses such a topic.
- https://www.youtube.com/watch?v=KgrLUQYgIJE (8.24 minutes)
After reviewing the video, attend the class and be able to explain:
- How price elasticity of demand is measured.
- Given price elasticity and marginal cost of the firm, how to calculate the optimal price for the firm.
- The relationship between elasticity and total revenue.
- How an increase in price can lead to an increase (decline) in total revenue, utilizing an elasticity figure.