A painter's costs Research Paper Example | Topics and Well Written Essays - 500 words

A painter's costs - Research Paper Example 3) When a 1 percent rise in price evokes less than a 1 percent fall in quantity demanded, this is price inelastic. From the value that we have obtained, we then know that paint as a commodity is price elastic. How does this relate to revenue for companies? Total revenue is equal to price times quantity or PXQ. The three cases of elasticity correspond to three different relationships between total revenue and price changes: If a price decrease leads to a decrease in total revenue, it is a case of inelastic demand. If a price decrease leads to an increase in total revenue, it is the case of elastic demand. And if a price decrease leads to no change in total revenue, it may be the case of unit-elastic demand. Since our good is price elastic, it may be wise for firms to lower their prices if they are to expect an increase in total revenue or profits because slashing their prices down, they are hiking their sales up by a larger magnitude.