Week 2 Learning Team Deliverable Team B
Week 2 Learning Team Deliverable - Team B
Misty DeMoss, Josefina Nowlin, Tiffany Richardson
ECO/561 - Economics
April 27, 2015
Dr. Guthlac Anyalezu
Week 2 Learning Team Deliverable - Team B
This week, Learning Team B reflected on the prior week’s assignment. We all agreed that the most significant take-away from the week’s lesson was the total-revenue test. The total-revenue test is a way to determine if a product is elastic (a decrease in price that will increase the total revenue and vice-versa) or inelastic (a decrease in price that will cause the total revenue to decrease and vice-versa) (McConnell, 2009, p. 116, para. 6). Businesses use this test to determine if they have a product that is elastic or inelastic by moving the prices of the products up and down and determining if the revenue is increasing or decreasing. For example, if a product currently sells for $5, the seller increases the price to $10, and the revenue goes down, the seller can determine that his product is elastic. If they seller’s revenue actually increases alone with the price increase that tells the seller that his product is elastic and is at a more demand regardless of the price. Depending on what types of products the seller has to sell will determine if they are necessities and will be elastic or inelastic.
The total-revenue test is used to help determine how the prices are affected by the demand and quantities of products sold. The total revenue formula is TR = P x Q; TR being total Revenue, P being the price of the units and Q being the quantity of goods sold. With this method, we are estimating the price of elasticity of demand and how it will influence the total revenue. Sellers use this formula on a graph to determine if the increase or decrease of the price or quantity will affect the TR. On a scale, if the TR moves in the opposite direction as the P, then the seller knows that they can increase the total revenue by decreasing the prices on items. Most
Misty DeMoss, Josefina Nowlin, Tiffany Richardson
ECO/561 - Economics
April 27, 2015
Dr. Guthlac Anyalezu
Week 2 Learning Team Deliverable - Team B
This week, Learning Team B reflected on the prior week’s assignment. We all agreed that the most significant take-away from the week’s lesson was the total-revenue test. The total-revenue test is a way to determine if a product is elastic (a decrease in price that will increase the total revenue and vice-versa) or inelastic (a decrease in price that will cause the total revenue to decrease and vice-versa) (McConnell, 2009, p. 116, para. 6). Businesses use this test to determine if they have a product that is elastic or inelastic by moving the prices of the products up and down and determining if the revenue is increasing or decreasing. For example, if a product currently sells for $5, the seller increases the price to $10, and the revenue goes down, the seller can determine that his product is elastic. If they seller’s revenue actually increases alone with the price increase that tells the seller that his product is elastic and is at a more demand regardless of the price. Depending on what types of products the seller has to sell will determine if they are necessities and will be elastic or inelastic.
The total-revenue test is used to help determine how the prices are affected by the demand and quantities of products sold. The total revenue formula is TR = P x Q; TR being total Revenue, P being the price of the units and Q being the quantity of goods sold. With this method, we are estimating the price of elasticity of demand and how it will influence the total revenue. Sellers use this formula on a graph to determine if the increase or decrease of the price or quantity will affect the TR. On a scale, if the TR moves in the opposite direction as the P, then the seller knows that they can increase the total revenue by decreasing the prices on items. Most
References: McConnell, C. R., Brue, S. L., & Flynn S. M. (2009). Economics: Principles, Problems, and Policies (18th ed.). New York, NY: McGraw-Hill/Irwin.