What would happen to unit sales and total revenue for this textbook if the publisher reduced its price?
Why did you post just part of this problem?
To understand the impact on unit sales and total revenue if the publisher reduces the price of a textbook, we need to consider the relationship between price, quantity sold, and total revenue.
When the price of a textbook is reduced, it generally leads to an increase in the quantity sold. This relationship is described by the law of demand, which states that as price decreases, quantity demanded increases.
So, if the publisher reduces the price of the textbook, we can expect the following effects:
1. Unit Sales: The quantity of textbooks sold is likely to increase. Some students who were previously hesitant to purchase the textbook due to its higher price may be more inclined to buy it when the price is lower. More sales would occur as a result.
2. Total Revenue: The impact on total revenue is not as straightforward as unit sales. While the increase in unit sales may lead to a revenue boost, the decrease in price might offset it. The change in total revenue depends on the price elasticity of demand for the textbook.
- If the demand for the textbook is relatively elastic, which means that a small change in price causes a proportionately larger change in quantity demanded, then the increase in unit sales might be substantial enough to outweigh the decrease in price. As a result, the total revenue might increase.
- On the other hand, if the demand for the textbook is relatively inelastic, which means that quantity demanded is not very responsive to changes in price, then the decrease in price might not generate a significant increase in unit sales. In such a case, the decrease in price could lead to a decrease in total revenue since the increase in unit sales is not enough to compensate for the lower price.
To accurately determine the impact on unit sales and total revenue, analyzing the price elasticity of demand for the textbook is crucial.