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CFA Level 1
Economics

Total Revenue Impact of Price Increase in Elastic Demand

Hard Microeconomics Demand And Supply Analysis

In a perfectly competitive market, there is a notable relationship between price elasticity of demand and total revenue. Consider the following scenario:

Suppose the market for solar panels has a price elasticity of demand of -2. A company that sells solar panels is currently selling 10,000 units at a price of $200 per unit and decides to increase the price to $220 per unit.

What will be the impact on the total revenue of the company due to this price change?

Hint

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