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23 August, 08:25

A monopolist can sell 10,000 units at a price of $17. Lowering price by $2 raises the quantity demanded by 2,000 units. What is the change in total revenue that results from this price change

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  1. 23 August, 10:31
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    The change in total revenue is $10000

    The percentage change in Total revenue is 5.88%

    Explanation:

    The revenue is a function of price multiplied by quantity sold.

    Revenue = Price * Quantity sold

    At the orignal price of $17, the monopolist is earning a revenue of,

    Revenue at $17 = 10000 * 17 = $170000

    The revised price for the monopolist is $17 - $2 = $15

    The revised demand and expected sales at the revised price is 10000 + 2000 = 12000 units

    The revenue at the revised values is,

    Revenue at $15 = 12000 * 15 = $180000

    The change in Total revenue = 180000 - 170000 = $10000

    The percentage change in revenue = 10000 / 170000 = 0.0588 or 5.88%
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