Elasticities Guiding Revenue Strategies

Steps:

• Revenue equals price times quantity sold; to increase it, predict quantity changes from price adjustments.
• Price elasticity of demand measures quantity response to own price changes, revealing if raising/lowering price boosts revenue.
• Cross elasticity of demand assesses how substitutes or complements affect demand, informing competitive pricing.
• Income elasticity predicts demand shifts with consumer income, but it's less direct for immediate revenue tactics.

Why A is correct:

• Price elasticity determines revenue impact via the formula %ΔQ/%ΔP; if elastic (>1), lowering price increases revenue, while cross elasticity guides responses to rival prices for market share gains.

Why the others are wrong:

• B: Cross elasticity alone ignores direct price-quantity effects; income elasticity focuses on economic cycles, not firm pricing.
• C: Income elasticity helps forecast long-term demand but omits competitive interactions needed for revenue optimization.
• D: Income elasticity only shows luxury/normal good status, insufficient without price response knowledge.

Final answer: A