Asked by Trap muzik Blossom on May 11, 2024
Verified
A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is
A) unit-elastic from the union's perspective and unit-inelastic from management's perspective.
B) perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.
C) elastic from the union's perspective, inelastic from management's perspective.
D) inelastic from the union's perspective, elastic from management's perspective.
Price Elasticity
A measure of the responsiveness of the quantity demanded of a good to a change in its price, illustrating how changes in price can affect consumer demand.
Unit-Elastic
A demand or supply situation where the percentage change in quantity demanded or supplied is equal to the percentage change in price, leading to no change in total revenue.
- Ascertain the impact of price fluctuations on overall income across various elasticity scenarios.
- Recognize the consequences of elasticity on revenue generation and pricing tactics.
Verified Answer
KR
Kiara RiveraMay 12, 2024
Final Answer :
C
Explanation :
The union believes a price cut will increase revenues, implying they think demand is elastic (a decrease in price leads to a proportionally larger increase in quantity demanded, raising revenue). Management believes the opposite, implying they think demand is inelastic (a decrease in price leads to a smaller proportionate increase in quantity demanded, lowering revenue).
Learning Objectives
- Ascertain the impact of price fluctuations on overall income across various elasticity scenarios.
- Recognize the consequences of elasticity on revenue generation and pricing tactics.