Calculate price elasticities of demand and changes in total revenue for each of the following price increase scenarios. 1. Price increases from $10 to $20. 2. Price increases from $30 to $40. 3. Price increases from $50 to $60.
Calculate
1. Price increases from $10 to $20.
2. Price increases from $30 to $40.
3. Price increases from $50 to $60.
Given, Price increases from $10 to $20 => price increased by 100%
Based on the given demand schedule, because of this the quantity demanded have declined from 500 to 450 => decline of 10%
Price elasticity of demand = (% change in quantity demanded / % change in price)
= -10/100
= -0.1
Change in total revenue = Total revenue (P = $20) - Total Revenue ( P = $10)
= 20*450 - 10*500
= 9000 - 5000
= 4000
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