OBLEMS If the price of a good or service increases and the total revenue receive
ID: 1143329 • Letter: O
Question
OBLEMS If the price of a good or service increases and the total revenue received by the seller dec demand for this good over this segment of the demand curve elastic or inelastic? Explain lines, is the 2. Suppose the price elasticity of demand for farm roducts is inelastic. If the federal government wants to follow a policy of increasing income for farmers, what type of programs will the government enact? 3. Suppose the price elasticity of demand for used cars is estimated to be 3. What does this mean? What will be the effect on the quantity demanded for used cars if the price rises by 10 percent? 4. Consider the following demand schedule: Quantity Elasticity demanded coefficient Price $25 20 15 10 20 40 60 80 What is the price elasticity of demand between a. P $25 and P $20? b. P $20 and P $15? c, P = $15 and P = $10? d. P $10 and P $5? tr tuition from $3,000 toExplanation / Answer
Ans:
1) Elastic
when the price elasticity of demand is elastic, a decrease in the price will increase the total revenue and a increase in the price will decrease the total revenue.In this case a increase in the price caused the total revenue to decline.Hence the demand for the good is elastic.
2) when the price elasticity of demand is inelastic, a increase in the price will increase the total revenue.In this case if the federal government wants to increase income for farmers, it should increase the minimum support price for farm products.
3) If the price elasticity of demand is greater than 1, the demand is said to be elastic.In this case price elasticity of demand is 3, hence demand is elastic.when the demand is elastic, a decrease in the price will increase the total revenue and a increase in the price will decrease the total revenue.Hence if price is increased by 10%, quantity demanded is decreased.
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