The demand curve for haircuts at Terry Bernard's Hair Design is P=20-0.20Q where Q is the number of cuts per week and P is the price of a haircut. Terry is condering raising her price above the current price of $15. Terry is unwilling to raise price if the price hike will cause revenues to fall. Should Terry raise the price of haircuts above $15 Why or why not? Suppose demand for Terry's haircuts increases to P=40-0.40Q. At a price of $15, should Terry raise the price of her haircuts? why or why not?"
2 answers
The demand curve for haircuts at Terry Bernard's Hair Design is P = 20 - 0.20Q where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of $15. Terry is unwilling to raise price if price hike will cause revenues to fall. Should Terry raise the price of haircuts above $15? Why or why not?
Increase in price will increase revenue if demand is inelastic . Hence , if demand is inelastic , He should increase the price .