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Insurance Revenues

When a company decides to change the
price of a product, it knows the demand for that product will change as a
result. Elasticity measures this change in demand as a result in the change in
price.

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In an effort to increase revenue for
the insurance industry, all insurance companies increased prices by 20 percent.
To its dismay, only a 10% increase in revenue was received instead of the 20%
increase that was expected.

Prepare an essay that addresses the
following questions:

  • What does this say about the elasticity demand for
    insurance products?
  • What were the insurance companies assuming the
    elasticity demand would be?

 Please Do In Word Doc

 

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