Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day.

-Refer to the scenario above.Mr.Olivander used to sell five wands per day.Now he plans to increase his sale to nine wands.The price effect of this plan is a ________,and the quantity effect of this plan is a ________ in his revenue.
A) $15 decrease; $20 increase
B) $125 decrease; $80 increase
C) $45 increase; $90 decrease
D) $35 decrease; $120 increase

Question

Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day.
 
-Refer to the scenario above.Mr.Olivander used to sell five wands per day.Now he plans to increase his sale to nine wands.The price effect of this plan is a ________,and the quantity effect of this plan is a ________ in his revenue.
A) $15 decrease; $20 increase 
B) $125 decrease; $80 increase 
C) $45 increase; $90 decrease 
D) $35 decrease; $120 increase

Quizplus · Accepted Answer

The price effect typically refers to the change in revenue due to the change in the price at which the product is sold, assuming quantity remains constant. If Mr. Olivander plans to increase his sales, he might need to decrease the price, which could lead to a decrease in revenue per unit sold. The quantity effect refers to the change in revenue due to the change in the quantity sold, assuming the price remains constant. Selling more wands, even at a potentially lower price, increases the total revenue from the quantity sold. The specific numbers provided in choice B suggest a scenario where the decrease in revenue per unit (price effect) is outweighed by the increase in total revenue due to selling more units (quantity effect).