Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama.To increase revenue,fishing lure manufacturers should:
A)lower prices in each state.
B)raise prices in each state.
C)lower prices in South Carolina and raise prices in Alabama.
D)leave prices unchanged in South Carolina and raise prices in Alabama.

Question

Quizplus · Accepted Answer

The price elasticity of demand in South Carolina is higher than in Alabama, meaning that consumers in South Carolina are more price-sensitive than those in Alabama. Therefore, lowering prices in South Carolina would likely result in a larger increase in demand, resulting in an overall increase in revenue. Conversely, raising prices in Alabama, where consumers are less price-sensitive, is less likely to result in a significant decrease in demand, allowing the manufacturer to increase revenue by charging a higher price. Therefore, the best option is to lower prices in South Carolina and raise prices in Alabama.

Suppose the Price Elasticity of Demand for Fishing Lures Equals