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14 March, 11:27

The price elasticity of demand for gizmos is known to be 1.0 (disregarding the negative sign). If sellers of gizmos increase their prices, total revenue from gizmo sales will - they will not fall so what will they do?

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  1. 14 March, 14:11
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    Assuming that the price elasticy of demand of gizmos is - 1.0 (the questions says that the value is "1.0 disregarding the negative sign"), we can see that gizmos is a perfectly inelastic good.

    The demand of perfectly inelastic goods do not respond to changes in price. If sellers of gizmos increase their prices, revenue will stay the same because people will continue to buy gizmos no matter how expensive they become.
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