Question

Total Revenue PRICE (Dollars per bike) O HAHAHAHA 9 18 27 36 45 54 63 QUANTITY (Bikes) Demand 81 90 99 72 108 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. Total Revenue TOTAL REVENUE (Dollars) 3060 + 0 25 50 225 250 275 300 75 100 125 150 175 200 PRICE (Dollars 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 $25 per bike, shown as point B on the initial graph. Because the demand between points A and B is 2, a $25-per-bike increase in price will lead in total revenue per day. In general, in order for a price decrease to cause a decrease in total revenue, demand must be

Answer 1

Ans:

TOTAL REVENUE ( Dollars) Total Revenue ||||||||| IIIIIIIIII 3780 3060 0 25 50 75 100 125 150 175 200 225 250 275 300 PRICE (Dollars per bike)

Explanation:

Total revenue  = Price * Quantity

Price ($)	Quantity (Bikes)	Total Revenue ($)
50	90	4500
75	81	6075
100	72	7200
125	63	7875
150	54	8100
175	45	7875
200	36	7200

Ans: According to the midpoint method, the price elasticity of demand between points A and B is approximately  - 0.14

Explanation:

Initial price ( P1) = $50

New price ( P2 ) = $25

Initial quantity ( Q1) = 90

New quantity ( Q2) = 99

PED  = ∆Q/∆P *( P1 + P2 / Q1 + Q2)

= {( 99 - 90 ) / ( 25 - 50 ) } * {( 50 + 25 ) / ( 90 + 99)}

= ( 9 / -25 ) * ( 75 / 189)

= -0.36 * 0.3968

= - 0.14 or 0.14 ( absolute value )

Ans: Suppose the price of bikes is currently $25 per bike , shown as point B on the initial graph. Because the demand between points A and B is inelastic, a $25 -per- bike increase in price will lead to increase in total revenue per day.

Ans: In general, in order for a price decrease to cause a decrease in total revenue, demand must be inelastic.

Explanation:

When demand is inelastic , then decrease in price will lead a decrease in total revenue.

When demand is inelastic , then increase in price will lead an increase in total revenue.