A firm sells 3,000 headphones at a price of $3 per unit. Even though this price is slightly higher than competing brands, the management is considering a further increase in price by 25 cents. The firm plans to focus advertising efforts on superior sound clarity. Rachel, the firm's marketing head, feels confident that a price increase by 25 cents will increase revenue. Industry analysts are of the opinion that even though the revenue is likely to increase, the firm must be careful of rivals who are actively competing for higher market share. The firm increased the price of headphones to $3.25 and anticipated a decline in quantity demanded by only 100 units. However, the firm was able to sell only 2,769 headphones at this new price. Which of the following is most strongly implied by this information? A. The market for headphones is going through a downturn. B. The demand for headphones is highly elastic. C. This firm has the highest share in the market for headphones. D. The demand curve for headphones in general is vertical. E. There will be almost no change in the total revenue after the price increase.
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A firm sells 3,000 headphones at a price of $3 per unit. Even though this price is slightly higher t...
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