Using knowledge of PED, when should a firm decrease the price of a good to maximise revenues?

A firm should only decrease the price of a good if the good is price elastic (PED>1). This is because in percent decrease in price will result in a greater percent increase in quantity demanded so revenues (PxQ) will rise.
If a firm decreases the price of a good that is price inelastic (0<PED<1), the percent increase in quantity demanded will be relatively lower so revenues fall.

Answered by Economics tutor

1122 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Using an example, explain the term ‘factors of production’. (5 Marks)


How do I answer an economics essay question?


What do consumer and producer surplus represent?


Explain how the diagram for a perfectly competitive firm demonstrates static efficiency.


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences