Suppose that at a price of Rs 30 per month there are 30000 subscribers to cable television in small Town. If small Town Cablevision raise its price to Rs 40 per month the number of subscribers will fall to 20000 At which of the following price does small Town Cablevision earn the greatest total revenue ?
Correct answer: B. Rs 30 per month
- A. Rs 0 per month
- B. Rs 30 per month
- C. Rs 40 per month
- D. Either Rs 30 or Rs 40 per month because the price elasticity of demand is 1.0
Explanation
Revenue at Rs 30 is Rs 900,000, calculated as 30,000 × 30, while revenue at Rs 40 is Rs 800,000, calculated as 20,000 × 40. Therefore, the lower price produces greater total revenue.
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