Question

The manager of a firm believes that she would lose sales if she raised her prices by $2.00, but the revenue lost would be more than offset by higher revenues from the higher price. This indicates that the manager perceives demand to be:_______.
a. inelastic.
b. elastic.
c. unit elastic.
d. insufficient information.

Answer 1

Answer:

This indicates that the manager perceives demand to be:_______.

c. unit elastic.

Explanation:

Unit elastic demand describes a demand curve which is perfectly responsive to changes in price. This implies that the quantity supplied or demanded changes according to the same percentage as the change in price.  For example, if the manager raises the price of her famous goods by $2.00, the unit elastic demand for that $2.00 increase would result in a decrease in the quantity demanded by one unit.