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Elasticity and revenue: a reappraisal

Author

Listed:
  • Antonio Quesada

    (Universidad de Murcia (Spain))

Abstract

It seems from what is explained in some textbooks that, for a given demand function, price and total revenue move in the same direction when elasticity is smaller than one and move in opposite directions when elasticity is greater than one, with elasticity from point (p, q) to point (p', q'') of a demand function defined as – [(q'' – q) / q] / [(p''– p) / p]. Since these two results turn out to be false, this comment clarifies the relationship between elasticity (as previously defined), price movements and changes in total revenue.

Suggested Citation

  • Antonio Quesada, 2002. "Elasticity and revenue: a reappraisal," Economics Bulletin, AccessEcon, vol. 4(13), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-02d10003
    as

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    File URL: http://www.accessecon.com/pubs/EB/2002/Volume4/EB-02D10003A.pdf
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    References listed on IDEAS

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    1. N. Gregory Mankiw, 1998. "Teaching the Principles of Economics," Eastern Economic Journal, Eastern Economic Association, vol. 24(4), pages 519-524, Fall.
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    Cited by:

    1. repec:ebl:ecbull:v:4:y:2002:i:17:p:1-7 is not listed on IDEAS
    2. Manuel Sánchez-Moreno & J. Ramón Ruiz-Tamarit, 2002. "Elasticity and revenue: do we need a reappraisal?," Economics Bulletin, AccessEcon, vol. 4(17), pages 1-7.

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    More about this item

    Keywords

    price change;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior

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