You are the newly appointed sales manager of the Rock Computer Tablets Company and have been charged with the task of increasing revenues. Your economics consultants have informed you that at present price and output levels, price elasticity of demand for your product is less than one. You should
A) decrease prices.
B) increase prices.
C) hold prices constant and increase supply.
D) cut advertising expenditures to save money.

Question

Quizplus · Accepted Answer

When the price elasticity of demand is less than one, demand is inelastic, meaning consumers are not very responsive to price changes. Increasing prices will lead to higher total revenue because the percentage drop in quantity demanded will be smaller than the percentage increase in price.

You Are the Newly Appointed Sales Manager of the Rock