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Inelastic Demand

Price inelastic demand indicates that changes in price have a minimal effect on the quantity demanded. The document outlines the calculation of price elasticity of demand and its impact on total revenue when the price of a good changes. It concludes that increasing the price of a price inelastic good is likely to increase total revenue.

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Inelastic Demand

Price inelastic demand indicates that changes in price have a minimal effect on the quantity demanded. The document outlines the calculation of price elasticity of demand and its impact on total revenue when the price of a good changes. It concludes that increasing the price of a price inelastic good is likely to increase total revenue.

Uploaded by

Allaysa Decastro
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Price Inelastic Demand (1 > PED > 0).

“The percentage change in Demand will be less than the percentage change in Price. The price of a good has
little effect on demand.”

Calculation

Old Situation New Situation Percentage Change


Demand 60 a month 40 a month

Price 50THB 250THB

Price Elasticity of Demand = Percentage Change in Demand


Percentage Change in Price

= ________________________

= (-) _______
A Graph of an Price Inelastic Product

Effect on Total Revenue

Total Revenue = Selling Price x Quantity Demanded

(1) Revenue before change = _________ x _________

= _________

(2) Revenue after change = _________ x _________

= _________

(3) Change in Total Revenue = _________

(4) If a firm increases the selling price of a Price Inelastic good, revenue is likely to ___________.

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