Revenue at a major smartphone manufacturer was $2.2 billion for the nine months ending March 2, up 87 percent over revenues for the same period last year. Management attributes the increase in revenues to a 129 percent increase in shipments, despite a 16 percent drop in the average blended selling price of its line of phones. Given this information, is it surprising that the company's revenue increased when it decreased the average selling price of its phones?

Question

Business

Forbes

9 September, 17:48

Revenue at a major smartphone manufacturer was $2.2 billion for the nine months ending March 2, up 87 percent over revenues for the same period last year. Management attributes the increase in revenues to a 129 percent increase in shipments, despite a 16 percent drop in the average blended selling price of its line of phones. Given this information, is it surprising that the company's revenue increased when it decreased the average selling price of its phones?

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Dominick Noble · Answer 1

No

Explanation:

Based on this information, it is not surprising that the company's revenue increased when the average selling price of its phones decreased. Based on the information provided in this passage, the demand for this product is elastic. This means that a reduction in price would most likely increase revenue. We can see that although the price of the phones decreased, there was an increase of 129% in shipments.