Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4, would you advise the company to raise the price, lower the price, or keep the price the same?

Question

04-03-2020
Business

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Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4, would you advise the company to raise the price, lower the price, or keep the price the same?

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isaacoranseola isaacoranseola · Answer 1 · 2020-03-05T02:27:43+01:00

Answer: Lower the price

Explanation:

The price elasticity of demand measures the sensitivity of the quantity demanded of a good. Also note that when Price elasticity of demand exceeds 1, the demand is elastic. And an elastic demand is when price or other factors have a huge effect on the amount consumers want to purchase . It states that the quantity purchased has an inverse relationship with price. When prices rise, people will buy less. The elasticity of demand tells you how much the amount purchased decreases when the price increases.