Question
A Financial Planning business is considering raising the price of advice from $120 to $150. Price: $120, Quantity demanded 12,000 units. Price $150, Quantity demanded
A Financial Planning business is considering raising the price of advice from $120 to $150.
Price: $120, Quantity demanded 12,000 units.
Price $150, Quantity demanded 8,000 units.
a) Use the total revenue method to determine the impact on revenue to this business. eg
P x Q = R
P1 x Q1 = R1
b) Using the mid-point formula calculate the price elasticity of demand using the same information. Show all your workings.
Price Elasticity of Demand = % change in Quantity Demanded
% change in Price
c)Is demand in the above example elastic or inelastic? Was this a good decision?
d)How would this impact on the organisational value and capital structure of this financial planning business?
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