question archive A company selling a typical good (non-Giffen) facing inelastic demand will be CERTAIN to increase profits by doing each of the following EXCEPT: (assume each of these is independent of any other change?in other words, each represents the ONLY change that will occur) a) lowering costs b) raising prices c) lowering prices d) selling fewer products e) we need more information; each of the above could result in increased profits
A company selling a typical good (non-Giffen) facing inelastic demand will be CERTAIN to increase profits by doing each of the following EXCEPT: (assume each of these is independent of any other change?in other words, each represents the ONLY change that will occur) a) lowering costs b) raising prices c) lowering prices d) selling fewer products e) we need more information; each of the above could result in increased profits
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A company selling a typical good (non-Giffen) facing inelastic demand will be CERTAIN to increase profits by doing each of the following EXCEPT: (assume each of these is independent of any other change?in other words, each represents the ONLY change that will occur)
a) lowering costs
b) raising prices
c) lowering prices
d) selling fewer products e) we need more information; each of the above could result in increased profits
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The correct option is (C).
A company selling a typical good (non-Giffen), facing inelastic demand, will be CERTAIN to increase profits by doing each of the following EXCEPT lowering prices.
Inelastic demand for a good is when quantity demanded doesn't change much due larger changes in its prices. It means that a larger change in the price of a good leads to relatively smaller changes in its quantity demanded. In this case, a seller can increase her revenue by raising its prices. Also, a lower cost of production will also increase the revenue. Supplying fewer quantities will also increase the revenues as it raises the prices of the good and, hence, the revenue will also increase.
