Question

Based on the information below please:

1. Calculate TR for each price level
2. Graph the demand curve (plotting price and quantity)
3. On a graph below – using the same quantity axis measurement- plot the TR- Since the vertical axis where you will plot price for the demand curve and dollar values of TR, if you plot both on the same graph you will find a small demand and the TR way above since those numbers will be much larger.
4. Without using the demand elasticity formula, show in what price range your demand is elastic, unit elastic and inelastic
5. Explain how you assessed those ranges (without using the formula)

Price              Quantity TR

10          1

9            2

8            3

7            4

6            5

5            6

4            7

3            8

2            9

Answer 1

Price	Quantity	Total revenue=Price* Quantity
10	1	10
9	2	18
8	3	24
7	4	28
6	5	30
5	6	30
4	7	28
3	8	24
2	9	18

When MR=0, TR is maximum and demand is unit elastic. As the percentage change in price is equal to the percentage change in quantity demanded.

TR is maximum when Q=6, and P=5

So, Demand is unit elastic when P=5.

Below this price level, demand is inelastic.

Above this price level, demand is elastic.

In other words,

P=$5, Demand is unit elastic.

For 2≤P<5 , demand is inelastic

For 5<P≤10, demand is elastic.

NICE Price 006 o Demand Jo-NW + 8 + + + Quantity

Total revenue curve-

TR 35 30 25 20 15 1 2 3 4 5 6 7 89 Quantity

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