Question

The following graph shows the daily demand curve for bikes in Miami.

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.

According to the midpoint method, the price elasticity of demand between points A and B is approximately _______ 

Suppose the price of bikes is currently $ 30 per bike, shown as point A on the initial graph. Because the demand between points A and B is  _______ 

, a $ 10-per-bike decrease in price will lead to _______  in total revenue per day.

In general, in order for a price increase to cause an increase in total revenue, demand must be  _______.

Answer 1

P	Q	TR
20	30	600
30	27	810
40	24	960
50	21	1050
60	18	1080
70	15	1050
80	12	960

1) Elasticity = [30-27/(30+27/2)]/[20-30/(20+30/2)]

= [3/28.5]/[-10/25] = 0.1053/-0.4 = -0.26

2) Inelastic

3) a decrease

4) inelastic