Problems 7 and 8 refer to the demand schedule shown in Table 4P-1. For each
Consider each of the following price increase scenarios.
- Price increases from $10 to $20. Demand is _____ and total revenue _____.
- Price increases from $30 to $40. Demand is _____ and total revenue _____.
- Price increases from $50 to $60. Demand is _____ and total revenue _____.
(a)
To fill: the given blanks with suitable answer.
Answer to Problem 7PA
The demand is "inelastic" and total revenue "increases".
Explanation of Solution
Since the negative sign shows the inverse relationship between price and demand,
TR when the price is 10 and the quantity is 350.
TR when the price is 20 and the quantity is 300.
The demand is "inelastic" and total revenue "increases".
(b)
To fill: the given blanks with suitable answer.
Answer to Problem 7PA
The demand is "inelastic" and total revenue "increases".
Explanation of Solution
Since, negative sign shows the inverse relationship between price and demand.
TR when price is 30 and quantity is 250.
TR when price is 40 and quantity is 200.
The demand is "inelastic" and total revenue "increases".
(c)
To fill: the given blanks with suitable answer.
Answer to Problem 7PA
The demand is "elastic" and total revenue "decrease".
Explanation of Solution
Since the negative sign shows the inverse relationship between price and demand. So, it should be ignored.
TR when the price is 50 and the quantity is 150.
TR when the price is 60 and the quantity is 100.
The demand is "elastic" and total revenue "decrease".
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Chapter 4 Solutions
Microeconomics
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