A firm should lower prices and still increase revenue if Option A.demandis elastic.Demand elasticity refers to how sensitive the quantity demanded of a product is to changes in its price. When demand is elastic, it means that a small change in price leads to aproportionatelylarger change in quantity demanded. In this scenario, if a firm lowers its prices, the decrease in price will result in a significant increase in the quantity demanded, leading to an overall increase in revenue.When demand is elastic, consumers are highly responsive to price changes. This often occurs when there are many substitute products available in the market, and consumers can easily switch between them based on price. Lowering prices can attract more customers, as they perceive theproductto be a better value for the lower price. As a result, the firm can sell a larger quantity of the product, compensating for the lower price per unit and ultimately increasing its total revenue.It's important to note that this strategy of lowering prices to increase revenue iseffectivewhen demand is elastic, but it may not work if demand is inelastic or if the elasticity of demand is equal to unity or zero.If demand is inelastic, which means that the quantity demanded is not very responsive to changes in price, lowering prices may not have a significant impact on increasingrevenue. In this case, consumers are less sensitive to price changes, and a decrease in price may not lead to a substantial increase in quantity demanded. Consequently, the decrease in price per unit may not be offset by a sufficient increase in sales volume, resulting in lower total revenue for the firm.If the elasticity of demand is equal to unity, it implies that the percentage change in quantity demanded is equal to the percentage change in price. In this situation, lowering prices would result in an equal percentage increase inquantitydemanded, but the impact on revenue would be uncertain. The change in revenue would depend on the specific price and quantity relationship.Lastly, if the elasticity of demand is equal to zero, it means that a change in price has no effect on the quantity demanded. This is known as perfectlyinelasticdemand. In this case, lowering prices would not lead to an increase in quantity demanded, and therefore, revenue would not increase either.In summary, a firm can lower prices and still increase revenue if demand is elastic because the decrease in price will lead to a proportionately larger increase inquantitydemanded, compensating for the lower price per unit and resulting in higher total revenue.To know more aboutDemandherebrainly.com/question/29999439#SPJ4...

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