1. You are a manager of AT & Tlong distance call. Your research department repor
ID: 1126727 • Letter: 1
Question
1. You are a manager of AT & Tlong distance call. Your research department reports that demand for long distance call increases 4 percent due to 8 percent decrease in the price of long distance call. what would you like to do for increasing total revenue? A Increase the price of long distance call B. Decrease the price of long distance call C. Keep the existing price D. None of the above You are a manager of AT & T long distance call. Your research department reports that demand for long distance call decreases 8 percent due to 4 percent price decrease by Verizon. What would you like to do for keeping your original sale restored? 2. A) Increase the price of long distance call B) Decrease the price of long distance call C) Keep the existing price D) None of the aboveExplanation / Answer
Answer 1. Increase in the price of long distance call for increasing total revenue because here elasticity of demand is less than 1 and demand is inelastic. As we have calculated that elasticity of demand is -0.5 which shows that elasticity of demand is less than 1. So the best option to increase total revenue is through increasing price calls.
Answer 2. Keep the existing price as same because when price goes down demand also goes down at increasing phase. So to retain same sales in the market the AT&T company charges same price for the calling in the business scanerio.
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