ECON101 Lecture 3: Module 3. Elasticity (2)

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browncrocodile545

23 Sep 2018

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Corey Van De Waal

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Linear curve at the midpoint of the demand curve, demand is unit elastic (ed = -1: always -1 for linear demand curves. At prices above the midpoint demand is elastic. At prices below the midpoint demand is inelastic. Total revenue: the price of the good multiplied by the quantity sold. Rise in price does not always increase total revenue. Total revenue test: method of estimating the price elasticity of demand by observing the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same) If a price cut increases total revenue, demand is elastic. If a price cut decreases total revenue, demand is inelastic. If a price cut leaves total revenue unchanged, demand is unit elastic. If a price increase increases total revenue, demand is inelastic. If a price increase decreases total revenue, demand is elastic. If a price increases leaves total revenue unchanged, demand is unit elastic.

Related Questions

In this question, we will determine the price elasticity of demand using both the coefficient of elasticity and the total revenue test.

Use the demand schedule in the table below to answer the following questions.

Quantity Demand	Price
10	200
20	150
30	100
40	50
50	25

a) Calculate the total revenue for each row in the demand schedule. indicate whether total revenue increases or decreases between each row int eh demand schedule. use the total revenue test to classify each price/quantity change as elastic, inelastic, or uni-elastic.

b) calculate the own price-elasticity coefficient for each row in the demand schedule. use the coefficients you calculate to classify each price/quantity change as elastic, inelastic, unit elastic.

in your answer it will be useful to recall that the midpoint formula for percentage change is:

%change midpoint = (final - initial) / ((finial + initial)/2)

and own price elasticity can be calculated by using the formula

Ed= (percentage change in quantity demand of product x) / (percentage change the in the price of product x)

fuchsiacoyote513

Use the following demand schedule for a monopolist to calculate total revenue and marginal revenue. For each price, indicate whether demand is elastic, unit elastic, or inelastic. Using the data from the demand schedule, graph the demand curve, the marginal revenue curve, and the total revenue curve. Identify the elastic, unit elastic, and inelastic segments along the demand curve.

Price (P)	Quantity Demanded (Q)	Total Revenue	Marginal Revenue	Price elasticity of demand
$5.00	0
4.50	1
4.00	2
3.50	3
3.00	4
2.50	5
2.00	6
1.50	7
1.00	8
0.50	9
0	10

ivoryyak837

Price (P)	Quantity Demanded (Q)	Total Revenue	Marginal Revenue	Price elasticity of demand
$5.00	0
4.50	1
4.00	2
3.50	3
3.00	4
2.50	5
2.00	6
1.50	7
1.00	8
0.50	9
0	10

scarletmammoth140

ECON101 Lecture 3: Module 3. Elasticity (2)

ECON101 Full Course Notes

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