Answered: Calculate the price elasticity of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following graph shows the demand curve for kumquats. Points A, B, C, and D mark price ranges over which you will be asked to calculate the price elasticity of demand for this good.

Use the purple rectangle labeled Total Revenue (diamond symbols) to compute total revenue at various prices along the demand curve. To see the area of the Total Revenue rectangle, select the shaded area with your mouse. You will not be graded on where you place the rectangle.

Total Revenue012345678910109876543210PRICE (Dollars per bushel per month)QUANTITY (Thousands of bushels)ABCD

Calculate the price elasticity of demand between points A and B and points C and D using the midpoint method, and fill in the Price Elasticity of Demand column in the following table. Then for each price range, identify if demand is elastic, inelastic, or unit elastic.

Price Range	Price Elasticity of Demand	Elastic, Inelastic, Unit Elastic	Change in Total Revenue
between Points
A and B
C and D			In the previous table, for each price range, indicate if total revenue increases, decreases, or does not change.

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