Final answer:
To figure out how price changes affect sales, Marc needs to consider the price elasticity of demand, which influences how changes in price affect the quantity demanded and, consequently, total revenue. Elastic demand suggests that lowering prices could increase total revenue, while inelastic demand indicates that raising prices might be more effective.
Step-by-step explanation:
Marc is interested in understanding how much changes in price will affect his business's sales. This concern is directly related to the concept of price elasticity of demand. Price elasticity measures how responsive the quantity demanded of a good or service is to a change in its price. It's a critical concept for businesses because it can help determine the most effective pricing strategies for maximizing revenue.
If a product or service has elastic demand, a decrease in price will lead to a disproportionately larger increase in quantity demanded, potentially increasing total revenue. Conversely, with inelastic demand, a price increase might not lead to a significant decrease in quantity demanded, which could also increase total revenue. When demand is unitary elastic, changes in price do not affect total revenue.
Understanding whether a market has elastic or inelastic demand is essential for businesses to make informed pricing decisions. If Marc's products have elastic demand, lowering prices might be beneficial, whereas, for products with inelastic demand, he might consider raising prices to increase revenue.
In summary, to maximize revenue, Marc needs to analyze the elasticity of his products and properly adjust the prices based on the demand elasticity. It's crucial to provide the correct option in the final answer to such a business strategy-related question.