Why is it a bad business practice to assume that raising prices will lead to increases in total revenue?
What will be an ideal response?
The reason is that revenue could move in either direction. What is crucial in determining whether it will rise or fall is dependent upon the elasticity of demand at the point where price is increased.
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Starting from short-run equilibrium, the following occurs: the money supply increases and labor productivity increases. What is the effect on the price level and Real GDP in the short run?
A) Real GDP falls and the price level necessarily rises. B) Real GDP rises and the price level necessarily rises. C) Real GDP rises and the effect on the price level cannot be determined. D) Real GDP falls and the effect on the price level cannot be determined. E) none of the above
If Anh's elasticity of labor supply is 1.5 and she increases her supply of labor by 5 percent, then the wage rate must have
A. Increased by 3.3 percent. B. Increased by 3.0 percent. C. Decreased by 7.5 percent. D. Increased by 7.5 percent.