Question

Suppose the city of tallahassee wants to raise revenues of electricity by increasing price. this will work if price elasticity of demand is __ than 1

Answer 1

To successfully raise revenues from electricity by hiking prices, the price elasticity of demand for electricity must be less than 1, which is known as inelastic demand.

Step-by-step explanation:

If the city of Tallahassee wants to raise revenues from electricity by increasing the price, this will work if the price elasticity of demand for electricity is less than 1.

When the price elasticity of demand is less than 1, the demand is considered inelastic, indicating that a 1 percent increase in price will lead to a less than 1 percent decrease in the quantity demanded.

This means that consumers do not significantly reduce their electricity consumption in response to price increases, so the revenue will increase when the price is raised.