Data for the market for graham crackers is shown below. Calculate the elasticity
ID: 2703018 • Letter: D
Question
Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.
Price of crackers
Quantity Demanded (per month)
$3
80
$2.5
120
$2
160
$1.5
200
$1
240
$1.00 - $1.50: ___________________________________
$1.50 - $2.00: ___________________________________
$2.00 - $2.50: ___________________________________
$2.50 - $3.00: ___________________________________
If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity. lease show work
Price of crackers
Quantity Demanded (per month)
$3
80
$2.5
120
$2
160
$1.5
200
$1
240
Explanation / Answer
elasticity of demand = dq/q / dp/p
$1.00 - $1.50: -40/240 /0.5/1 = -0.333
$1.50 - $2.00: (-40/200) / (0.5/1.5) = -0.6
$2.00 - $2.50: (-40/160)/(0.5/2) = -1
$2.50 - $3.00: (-40/120) / (0.5/2.5) = -1.66
the firm should lower the price as we see the elasticity increases
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