Question

Please graph both graphs.

The fill in the blanks for the written are in order:

(0, 0.47, 2.14, 45.01)

(Elastic, inelastic, unit elastic)

(A decrease, an increase, no change)

(Elastic, inelastic, unit elastic)

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. 300 275 250 225 200 175 150 125 100 75 50 Total Revenue 0 612 18 24 30 36 42 48 54 60 66 72 QUANTITY (Bikes)

Answer 1

P ($)	Q	TR ($)
50	54	2700
75	48	3600
100	42	4200
125	36	4500
150	30	4500
175	24	4200
200	18	3600

Total revenue = P x Q

Total Revenue (S) 5000 4500 4000 3500 g 3000 2500 2000 1500 1000 500 Total Revenue (S) 50 100 150 200 250 Price ($)

PE = (P1 + P2)/(Q1 + Q2) x (Q2 - Q1)/(P2 - P1)

The price elasticity of demand between points A and B is approximately = (24 - 18)/(175 - 200) x 375/42 = 2.148

Because the demand between points A and B is elastic, a $25 per bike increase in price will lead to decrease in total revenue per day.

In general, in order for a price decrease to cause an increase in total revenue, demand must be elastic. (quantity demanded should change by a greater percentage in comparison to change in price percentage)