Nataraj (2007) finds that a 100% increase in the price of water for heavy users in Santa Cruz caused the quantity of water they demanded to fall by an average of 20%. (Before the increase, heavy users initially paid $1.55 per unit, but afterwards they paid $3.10 per unit.) In percentage terms, how much did their water expenditure (price times quantity)long dashwhich is the water company's revenuelong dashchange? With the price increase, the company's revenue changed by .31 nothing%. (Enter your answer rounded to two decimal places.)

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TomShelby TomShelby · Answer 1 · 2019-09-18T17:10:12+02:00

Answer:

The sales revenue will increase by 60%

Explanation:

Let's work this as the amount of sales were 1 units:

Price when to 3.10 dollars from 1.55

And quantity from 1 untis to "0.8 unit"

So revenue before price changes: 1.55 x 1 = 1.55

Revenue after price changes: 3.10 x 0.8 = 2.48

The percentaje in sales revenue will be.

new price sales/ old price sales - 1 = 2.48 / 1.55 -1 = 0.6

We can conclude the sales revenue will increase by 60%