Elasticity - 9

You, however, are more in touch with teenage trends and fashion than I am. You reply ''Brand ''X'' is really popular at the moment. I believe we can increase the price to $1.40 per can. We will lose very few sales''.

You show me your analysis (shown above) of the market for brand ''X''. An increase in price to $1.40 per can will only cause a loss of 10 cans in sales per day. The revenue gain from the increase in price ($0.40 x 190 cans = $76) will more than compensate for the revenue loss caused the decrease in quantity sold ($1.00 x 10 = $10)

You have correctly noticed that Brand ''X'' is price inelastic, and that an increase in price will generate more net revenue.