Final answer:
The correct answer is A. Total revenue depends on sales. It changes with the number of hats and sunglasses sold and can be influenced by the price elasticity of demand, as total revenue is calculated by multiplying the price by the quantity sold.
Step-by-step explanation:
The question about selling hats for $10 each and sunglasses for $5 each tackles the concept of total revenue, which is a fundamental topic in economics and business. Total revenue is the total amount of money that a company receives from sales of its products or services. In this scenario, total revenue will be the sum of the revenue from selling hats and the revenue from selling sunglasses. The question provides four options to describe how total revenue behaves in this situation.
Let's consider the definition of total revenue, which is the price of the goods times the quantity sold. If a business sells hats at $10 per hat and sunglasses at $5 per pair, and it sells 'x' number of hats and 'y' number of sunglasses, the total revenue (TR) can be expressed as TR = 10x + 5y. Therefore, the more items sold (hats or sunglasses), the higher the total revenue. Thus, the correct answer to the question is: A. Total revenue depends on sales. Total revenue is not fixed, constant, or wholly unpredictable in this case because it varies based on the quantity of hats and sunglasses sold.
Understanding the price elasticity of demand is essential for making decisions regarding pricing strategies. If the demand for a product is elastic, lowering the price may lead to a proportionally larger increase in sales, thus increasing total revenue. Conversely, if demand is inelastic, raising the price could lead to a smaller reduction in quantity sold, also increasing total revenue. Lastly, if demand shows unitary elasticity, changes in price will not significantly affect total revenue since the change in quantity sold will offset the effect.