Inelastic demand and increased prices
If the demand for a product is inelastic, what will happen to total revenue if price is increased?
Below is my response but I need more words.
The total revenue will increase. When demand is inelastic, a given percentage increase in price corresponds to a smaller percentage decrease in quantity demanded. Thus total revenue, which is equal to price times quantity, must increase. The percentage change in the quantity demanded is less than the percentage change in price, then demand is inelastic.
For example; If the demand for insulin is inelastic, an increase in insulin prices leads to more total revenue for insulin makers© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/economics/applied-economics/inelastic-demand-and-increased-prices-gahl
...demand is inelastic and the selling price for the product to service is increased, the total revenue will surely increase.
When demand is inelastic, a given percentage increase in price corresponds to a smaller percentage decrease in quantity demanded.
Now, consider this example:
Original demand (d1) = 2,000 units
New demand (d2) = 1,900 units
Original price (p1) = $200 per unit
New price (p2) = $250
Solving for the price elasticity of demand (epd):
Epd = Change in quantity demanded / Change in price
Epd = [(1,900 - 2,000) / 2000] divided by ...