Question

You are an economist working for verizon. you discover that demand for phone calls during the business hours is inelastic and demand for phone calls during the evening hours is elastic. how could your company use this information to increase total revenue ? how would you proceed to advise the president of the company ?

use your own word ( 200 words )

Answer 1

Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level.

Ed= % change in the quantity demand/ % change in the price.

The demand for a good is relatively elastic if the responsiveness of consumers to a change in the price of the good is high. Hence with the increase in the price leads to more effects on the quantity demand. Therefore with the increase in the price, the Total revenue decreases.

The demand for a good is relatively inelastic if the responsiveness of consumers to a change in the price of the good is low. Hence with the increase in the price leads to less effects on the quantity demand. Therefore with the increase in the price, the Total revenue increases.

As an economist working for verizon when it has been found that demand for phone calls during the business hours is inelastic and demand for phone calls during the evening hours is elastic.

An economist advise for the company will be that it can increase its total revenue by increasing price phone calls during the business hours because it is inelastic in nature while decrease in the price of phone calls during the evening hours which is elastic in nature.