We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Demand and Supply Factor Affecting Revenue Generation Essay

* Price elasticity of demand describes how much a change in price will affect the level of demand for a certain product or service. If a certain good or service has high price elasticity, demand will tend to fall quickly if the price of the good or service increases and demand will increase quickly if the price of the good or service falls. On the other hand, for goods and services with low price elasticity, an increase in price will cause a relatively small drop in demand and a price cut will result in a relatively small increase in demand. Elasticity of Demand and Total Revenue

* The total revenue a business earns equals the total amount of goods and services sold times the price of those the goods and services. Price elasticity affects the total revenue in that it governs how much more or less revenue a business will make by changing the prices of products or services. For example, if a company currently sells 100 shirts a month at a price of $10, its total monthly revenue is $1,000. If it increases the price of shirts to $12, the company might still sell 95 shirts a month if the demand for shirts is relatively inelastic. At the new price level, the company earns $1,140 in total revenue a month. On the other hand, if consumers are very sensitive to the changes in the prices of shirts, the company might only sell 60 shirts a month at the $12 price. In this case, the company’s total revenue would fall to $720 a month.

We will write a custom essay sample on Demand and Supply Factor Affecting Revenue Generation specifically for you
for only $16.38 $13.9/page

Order now

How to cite this page

Choose cite format:

Demand and Supply Factor Affecting Revenue Generation. (2016, Oct 07). Retrieved from https://studymoose.com/demand-and-supply-factor-affecting-revenue-generation-essay

We will write a custom essay sample on
Demand and Supply Factor Affecting Revenue Generation specifically for you

for only $16.38 $13.9/page
Order now

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.

Our customer support team is available Monday-Friday 9am-5pm EST. If you contact us after hours, we'll get back to you in 24 hours or less.

By clicking "Send Message", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
No results found for “ image
Try Our service