Price Elasticity of Demand & Total Revenue
This piece received a mark of 74. It is the work of Ethan Venables and should only be used
as an example. References can be found on the 5th page.
Module Name and Number: UBEE
Word Count: 1498
Describe the linkage between price elasticity of demand and total revenue using a
demand curve. Use this linkage to explain the Clifton Suspension Bridge crossings
toll charge rise in April 2014 and the First Bus Bristol fare cuts in November 2013.
In this assignment I will use a demand curve to explain price elasticity of demand
and total revenue. I will use the Clifton Suspension Bridge toll charge increase and
First bus service price changes as case studies to apply this framework.
Price elasticity of demand is used to measure how responsive a change in demand
is to a change in price. It “measures the strength of response of one variable to
another variable, holding everything else constant” (Zhu, 2016). It helps businesses
to choose the best price for their product or service which, in turn, allows them to
maximize their profit and market share and to generally meet their chosen
objectives.
The formula for price elasticity of demand is the percentage change in quantity
demanded divided by the percentage change in the price. We refer to the answer in
terms of elasticity; if the price elasticity is less than one then we say that the
goods/service is ‘inelastic’. If it is greater than one they are said to be ‘elastic’ (The
Hutchinson, 2015).
[End of preview – Essay continued on following page]
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This piece received a mark of 74. It is the work of Ethan Venables and should only be used
as an example. References can be found on the 5th page.
Module Name and Number: UBEE
Word Count: 1498
Describe the linkage between price elasticity of demand and total revenue using a
demand curve. Use this linkage to explain the Clifton Suspension Bridge crossings
toll charge rise in April 2014 and the First Bus Bristol fare cuts in November 2013.
In this assignment I will use a demand curve to explain price elasticity of demand
and total revenue. I will use the Clifton Suspension Bridge toll charge increase and
First bus service price changes as case studies to apply this framework.
Price elasticity of demand is used to measure how responsive a change in demand
is to a change in price. It “measures the strength of response of one variable to
another variable, holding everything else constant” (Zhu, 2016). It helps businesses
to choose the best price for their product or service which, in turn, allows them to
maximize their profit and market share and to generally meet their chosen
objectives.
The formula for price elasticity of demand is the percentage change in quantity
demanded divided by the percentage change in the price. We refer to the answer in
terms of elasticity; if the price elasticity is less than one then we say that the
goods/service is ‘inelastic’. If it is greater than one they are said to be ‘elastic’ (The
Hutchinson, 2015).
[End of preview – Essay continued on following page]
1
