Total revenue is calculated as the quantity of a good or service sold multiplied by its market price. Thus, it is a measure of how much money a company makes from selling its product. The core objective of a firm is maximizing profit. One of the ways to maximize profit is increasing total revenue. The firm can increase its total revenue by selling more items or by raising the price. Among others, this depends on the nature of the price elasticity of demand. Moreover, the length of time is an important factor in determining price elasticity of demand and supply.
*Please answer the following;
1) Explain the relationship between the price elasticity of demand and total revenue. What are the impacts of various forms of elasticities (elastic, inelastic, unit elastic, etc.) on business decisions and strategies to maximize profit? Explain using empirical examples.
2) Is the price elasticity of demand or supply more elastic over a shorter or a longer period of time? Why? Give examples.
3) What are the impacts of government and market imperfections (failures) on the price elasticities of demand and supply?