The Teenager Company makes and sells skateboards at an average price of $70 each

Economics Dec 18, 2020

The Teenager Company makes and sells skateboards at an average price of $70 each. During the year, they sold 4,000 of these skateboards. The company believes that the price elasticity for this product is about -2.5. What was the total revenue for the past year, in dollars? If the company want to increase revenue, should they charge a higher price?

Expert Solution

Total revenue = price x quantity sold = 70 *4000 = $280,000. Since the price elasticity is greater than one, demand is elastic. So if the company will loose revenue if they charge a higher price.

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