Question

If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P X Q before and after the price change)

Answer 1

Revenue will decrease

Explanation:

Note: the question did not provide the quantity to work with, so we will assume some values, say quantity Q= 30

Generally, it is normal for the revenue to decrease when the price of a commodity increase, this is so that buyer will have to react to adjust to the change in price.

When price increase from $50 to $60, the total revenue will decrease

let say the quantity Q1=30 , and the new quantity after price increase is Q2=20

1. The revenue PxQ before price change will be

PxQ= P1xQ1=50*30

PxQ= $1500

1. The revenue PxQ after price change will be

PxQ=P2xQ2= 60*20

P2xQ2= $1200

This clearly shows that based on the assumed data, the total revenue will drop from1500 to 1200, a total of $300 in a decrease