Question

 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 per day.

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

Answer 1

price	quantity	total revenue
$50	30	1500
$75	27	2025
$100	24	2400
$125	21	2625
$150	18	2700
$175	15	2625
$200	12	2400

The total revenue curve is initially upward sloping till price = $150 and falls when price increases more than $150.

A(21 , 125)= (q1, P1)

b ( 24,100)= (q2 , p2)

price elasticity = (q2- q1)*([p1+ p2)/2] / (p2 - p1)*[( q2 + q1)/2 ]

q2- q1 = 24- 21 = 3

(q2 + q1)/ 2 = (24 + 21)/2 = 22.5

p2- p1 = 100 - 125 = -25

(P2+ p1 )/2 = 100 +125 /2 = 112.5

putting the values in question

elasticity = 3*112.5/ 25*22.5

= 337.5/562.5

= 0.6

price elasticity between points And B is 0.6 .Suppose the price of bike = $125 . Because the demand for bikes between A and B is inelastic , a $25 per bike decrease in price will lead to DECREASE in total revenue .

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