Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
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Question “Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.”
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $50, $75, $100, $125, $150, $175, and $200 per bike.
According to the midpoint method, the price elasticity of demand between points A and B is approximately _______ .
Suppose the price of bikes is currently $125 per bike, shown as point A on the initial graph. Because the demand between points A and B is _______ a $25-per-bike decrease in price will lead to_______ in total revenue pér day.
In general, in order for a price increase to cause an increase in total revenue, demand must be _______
Answer
Ans:
Explanation:
Total Revenue = Price * Quantity
Price ( $) |
Quantity ( Bikes) |
Total Revenue ( $) |
50 | 60 | 3000 |
75 | 54 | 4050 |
100 | 48 | 4800 |
125 | 42 | 5250 |
150 | 36 | 5400 |
175 | 30 | 5250 |
200 | 24 | 4800 |
Ans. The price elasticity between A and B, according to the midpoint methodology, is about – HTML6
Explanation:
Price at the beginning (P1) = $125
New price ( P2 ) = $100
42
48
PED = Q/P (P1 + P2/Q1 + Q2)
= ( 48 – 42 ) / ( 100 – 125 ) * ( 125 + 100 ) / ( 42 +48)
= ( 6 / -25 ) * ( 225 / 90)
= -0.24 * 2.5
= – 0.6
Ans. Let’s say that the bike price is $125, as shown in the initial graph. Since the demand between points B and A is elastic, a $25 decrease in bike price will result in less revenue per day.
Ans. In order for a price rise to result in an increase in total revenues, the demand must be elastic.
Explanation:
If demand is not elastic, then a decrease of price will result in a decrease in total revenues.
If demand is not elastic, an increase in price will result in increased total revenue.
Conclusion
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