Activity – Elasticity, Total Revenue, and Optimal Pricing

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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.

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.

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