4-5 Draw the price effect and the quantity effect for a price change from $60 to $70. Which effect is larger? Does total revenue increase or decrease? No calculation is necessary. 90807060PRICE($3020100Demand100200300QUANTITY400500

Answered: Draw the price effect and the quantity…

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

4-5

Draw the price effect and the quantity effect for a price change from $60 to $70. Which effect is larger? Does total revenue increase or decrease? No calculation is necessary.

90
80
70
60
PRICE($
30
20
10
0
Demand
100
200
300
QUANTITY
400
500

Expert Solution

Step 1

Increase in price causes price effect and quantity effect. Increase in price causes rise in revenue due to rise in price and quantity effect means revenue declines due to fall in quantity.

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