Elasticities and Their Applications Practice Questions | A-Level Economics

Elasticities and Their Applications

Question 1 of 30

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A firm estimates the price elasticity of demand (PED) for its product to be \(-0.4\) in the short run and \(-1.2\) in the long run. The firm is considering a 10 percent price increase. Which statement is most accurate if the firm objective is to increase total revenue over the next 18 months?

Select one option.

Total revenue will increase in both the short run and the long run
Total revenue will fall in both the short run and the long run
Total revenue will rise in the long run but fall in the short run
Total revenue will rise in the short run but fall in the long run
Total revenue cannot be inferred from PED without knowing marginal cost

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