Question

In general, in order for a price increase to cause an increase in total revenue, demand must be

Answer 1

A price increase will raise total revenue when demand is inelastic, as a higher price results in a proportionally smaller decrease in quantity sold. If demand is unitary elastic, changes in price will not affect total revenue. For elastic demand, a price increase could decrease total revenue.

Step-by-step explanation:

In general, for a price increase to cause an increase in total revenue, the demand for the product must be inelastic. This means that the percentage increase in price results in a smaller percentage decrease in the quantity sold, thereby raising total revenue. If the demand is elastic, a price increase would result in a larger percentage decrease in quantity, which could lower total revenue.

Applying this concept, if a band considers raising ticket prices, it should do so only if the demand for its tickets is inelastic at the original quantity level. If demand is unitary elastic, the band should understand that a moderate percentage change in price will lead to an equivalent percentage change in quantity sold, making revenue remain constant. Therefore, no price change would be necessary if the goal is to maintain total revenue.

Answer 2

Answer: high

Step-by-step explanation:
The price elasticity of demand can be used to determine how an increase in price will affect demand. A higher price will cause a reduction in demand, so it is necessary to carefully work out price elasticity before trying to increase revenue.
The current demand should be sufficiently high to justify the lowered demand when a price increase is put into effect.