Question

6. Elasticity and total revenue 

The following graph shows the daily demand curve for bikes in Denver 

Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand cur 

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 $200 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 a decrease in total revenue, demand must be

Answer 1

Ans:

Price ($)	Quantity ( Bikes)	Total Revenue
50	100	5000
75	90	6750
100	80	8000
125	70	8750
150	60	9000
175	50	8750
200	40	8000

10000 9000 8000 8 7000 w 6000 Z 5000 4000 H 3000 O 2000 1000 -Total Revenue 0 0 25 50 75 100 125 150 175 200 225 PRICE ( Dollars per bike )

Answer to the Blank 1 : PED between point A and B is approximately 1.66

Explanation:

PED between point A and B =

= { ( 50- 40 ) / (200 -175 )} * { (200 +175 ) / ( 40 +50 )}

= (10 / 25 ) * ( 375 / 90 )

= 0.4 * 4.1666

= 1.66

Answer to the Blank 2 : Elastic

Answer to the Blank 3 : Increase in total revenue

Answer to the Blank 4 : Elastic

Answer 2

there is no 1.66 for answer 1