You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to
A)increase the price of all massages.
B)reduce staff in order to reduce operating costs.
C)determine the price elasticity of supply for massages.
D)determine the price elasticity of demand for massages.

Question

Quizplus · Accepted Answer

Determining the price elasticity of demand for massages will help to determine how much of an impact a price change will have on the demand for massages. This information can then be used to determine the appropriate pricing policy to increase total revenue. Option A would be a hasty decision without understanding the market and how consumers react to price changes. Option B may reduce costs, but it may also negatively affect the quality of the service, which can ultimately harm revenue. Option C is not the best choice because the elasticity of supply does not provide information on the consumer's responsiveness to price changes.

You Have Just Been Hired as a Business Consultant to Determine