Answer:
The firm's revenue after the price rise will be US$ 5,775
Explanation:
1. For calculating the quantity supplied after the price rise, we use the following formula:
Price elasticity of demand (PED) =
Percentage change in quantity demanded/Percentage change in price
2. Let's replace the formula with the data given:
0.5 = Percentage change in quantity demanded/10
Percentage change in quantity demanded = 0.5 * 10
Percentage change in quantity demanded = 5%
3. Let's find out the new quantity demanded after the price rise:
Quantity after the price rise = (Quantity before the price rise * Percentage change in quantity demanded) + Quantity before the price rise
Quantity after the price rise = (500 * 5%) + 500
Quantity after the price rise = 25 + 500
Quantity after the price rise = 525
4. For calculating the new revenue, we take the new price and the quantity after the price rise:
New revenue = New price * Quantity after the price rise
New revenue = 11 * 525
New revenue = US$ 5,775
After the price rise from US$ 10 to US$ 11, the company will supply 525 units that will generate US$ 5,775 of revenue.