Question

WidgetCo wants to increase the total amount of money they make after expenses. They're unable to change their internal costs. Which factor can WedgetCo lower to drive higher volume and increase the money they make after expenses?

Answer 1

Sale price

Step-by-step explanation:

Depending on the price elasticity of demand (PED) of the products that WidgetCo sells, a decrease in the selling price of their products might increase the total units sold in a larger proportion, resulting in an increase in total revenue.

PED refers to the proportional change in the quantity demanded for a product when the price changes by 1%.

PED = % quantity demanded / % change in price

• If PED > 1, the demand is elastic.
• If PED < 1, the demand is inelastic.
• If PED = 1, unit demand.

When a product's demand is elastic, a small change in the price will cause a larger change in the quantity demanded.

If the PED of WidgetCo's products is elastic, then it can increase total revenue by lowering the sale price or their products.