Question

if a plastic surgeon has a sale and reduces the price, total revenue for her service will go up if what happens?

Answer 1

The total revenue for a firm which offers any good or services is directly related to the market demand for the product. Over the years, economists have been able to devise the relationship between price and quantity demanded and they believe that as the price for goods and services go down, the demand for them increases. The same can also be explained in terms of the additional capacity of the person to purchase the good.

For example, if an item used to cost 10$ for 1 and now costs 1$ only, then the person on a tight budget can amplify his demand by 10 times. Further, someone who never could have afforded the product, also can start to purchase the same.

Plastic surgeons also would have a market demand, and reducing the prices is good only if the demand reaches out to avail the service. Once the business is able to get additional demand for itself, it would start making additional revenue as well. It is important to note that the type of service being offered also plays an important role here. If people do not demand more despite a reduction in prices due to other factors such as experience of the doctor and past revenues, the demand would not increase causing losses.

Thus, we can conclude by saying if the market demand shifts towards the surgeon, due to a decrease in price, it is only then that it will be able to generate additional revenue.

Please feel free to ask your doubts in the comments section.