The producer of X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for X is 1.25. As an economist, what would you advise the producer to do in order to raise total revenue? Would you advise him to raise prices or lower prices of good x? Why? Explain.

Question

The producer of X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for X is 1.25. As an economist, what would you advise the producer to do in order to raise total revenue?  Would you advise him to raise prices or lower prices of good x? Why? Explain.