Changes in price and costs

IB Business Management: Changes in price and costs

An increase in the selling price reduces a firm’s break-even level of output. Diagrammatically, the higher price results in a greater gradient of the total revenue line (from TR1 to TR2), as shown in the diagram below. This reduces the break-even quantity from BEQ1 to BEQ2.The opposite is true for a reduction in price, i.e. the firm would have to sell more in order to break-even.This means that a higher price will...

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