Calculating Price Elasticity of Demand Suppose that 50 units of a good are deman

Question

Calculating Price Elasticity of Demand

Suppose that 50 units of a good are demanded at a price of $1 per unit.  A reduction in price to $0.20 results in an increase in quantity demanded to 70 units.  Show that these data yield a price elasticity of 0.25 By what percentae would a 10 percent rise in the price reduce that quantity demanded, assuming price elasticity remains constant along the demand curve.

Price Elasticity and total revenue

Fill in the blanks for each price quantity combination listed in the following table.  What relationship have you depicted?

P

$9

$8

$7

$6

$5

$4

$3

$2

Q

1

2

3

4

5

6

7

8

Price Elasticity

This is the area I am having a trouble caculatiing? Can I get an example with P $9,  Q 1 and TR 9

Total Revenue

9

16

21

24

25

24

21

16

Explanation / Answer

price elasticity =(q2-q1)/(p2-p1)*(p average/q average)

q average =(50+70)/2 =60

=(70-50)/(-0.2) *1/(60)

= 0.25

price elasticity at TR =$9 is if price decreases by $1 , then quantity increase from 1 to 2

p avg =(9+8)/2 =8.5 , q avg =1+2)/2 =1.5

so elasticity =(2-1)/(8-9) *(8.5/1.5)

= -5.666

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.