When we are at unit elastic for a good, should we increase, decrease, or leave the price of the ticket unchanged if we want to increase revenue?

Economics Dec 13, 2020

Expert Solution

When the demand for a good is unitary elastic, any change in the price of the good will not have any impact on the total revenue of the good. The total revenue will remain unchanged. This is because any increase or decrease in percentage change in price will lead to an equivalent percentage decrease or increase in quantity demanded of the good. This keeps the total revenue unchanged. Thus, any change in the price of the good, will not bring any change in revenue. So, if the firm decides upon increasing or decreasing the price of the good, it will not lead to an increase in revenue. The firm should thus, leave the price of the ticket unchanged.

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