Question

Refer to the demand schedule below: Quantity demanded Price ($) 80 70 60 50 100 150 200 250 300 350 400 0 Price increases from $40 to $50. Demand is (Click to select) , and total revenue (Click to select)

Answer 1

Answer
elastic
decreases
===

The elasticity of demand=(change in quantity/average quantity)/(change in price/average price)
Change in quantity=150-200=-50
average quantity=(150+200)/2=175
change in price=50-40=10
average price=(50+40)/2=45
Elasticity of demand=((-50/175)/(10/45)
=-1.28571429
=1.29 (absolute value rounded to two decimal places)
the elasticity is above 1 so the demand is elastic

the demand is elastic and the price increases so the total revenue decreases

TR=P*Q
TR(200)=200*40=8000
TR(150)=150*50=7500