• Explain the impact on total revenue of a supplier if the goods sold have inelastic price elasticity of demand. Provide examples.

• Explain the impact on total revenue of a supplier if the goods sold have an elastic price elasticity of demand. Provide examples.

• Make sure you understand the 3 definitions in the box on page 41 of Nellis and Parker – if possible, write examples using these from your experience. 

Explain the impact on total revenue of a supplier if the goods sold have inelastic price elasticity of demand. Provide examples.

In economics, if an increase in the price leads to an increase in the total revenue, and that increase does not affect the quantity of the product in demand, then the relationship between the total revenue and the price elasticity of the demand is deemed as inelastic (Gallo, 2015). The price elasticity of the demand is a representation of the responsiveness of the consumer purchase of the product, which invariably drives the product price and the revenue for any organization. In the case of my jewellery shop for example, we have noticed that an increase in the price of the gold jewellery does not reduces the demand of the product (jewellery) for some time, at which time we are at a stage of perfect elasticity, however, this does not continue for a long time. Needless to say, this increase the total revenue for us, however, even when this relation is simply inelastic, we do see some degree of improvement in the revenue with the price raise that can be anticipated beforehand, and we stock our products accordingly at that time. Can you suggest some scenarios when this sort of relationship can be evident between the supplier and the buyer?

Explain the impact on total revenue of a supplier if the goods sold have an elastic price elasticity of demand. Provide examples.

One of the important relations in economics is that of demand and supply and its impact upon the total revenue for the organization. In this sense, if an organization supposedly have a fall in the price than the demand for the product can be increased, and similarly the revenue increases (Gallo, 2015). The same has been acknowledged in the case of my jewellery shop as well, where the revenue increased post the drop in the gold price, however, that attributed was dependent on the increase of the income, and not so much at the price drop of the gold. At such time, despite low profit, we benefited from the high quantity of sales at the store.

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