Question

12. If the price decreases from $10 to $8 and the quantity demanded increases from 50 units to 55 units the price-elasticity of demand at $10 is _______________________. Thus the price elasticity of demand is _______________________ and therefore total revenue can be increased by ________________________ the price.

13. The elasticity of demand gives the _______________ change in quantity demanded give the __________________ change in price.

14. If Demand is relatively elastic and Supply is also relatively elastic and the government imposes a price ceiling below the market-clearing price the ___________________ will be ____________ than if Supply and Demand were relatively ___________________. (Hint: elastic Supply and Demand are flat, inelastic steeper so draw the two cases imposing a price below the equilibrium and see which case gives you a bigger disturbance)

15. Demand is inelastic is the price elasticity is _________________then one and is elastic if the price elasticity is ________________then one in absolute value

Answer 1

Hi! Welcome to Chegg!

Due to presence of Chegg policy, I am answering two questions.

12.

Ans: Price elasticity = -0.5

total revenue can be increased by increasing the price.

Reason: Price change = -20%

Quantity change = 10%

Q will fall by less than rise in P after price rise. Hence, revenue (PQ) rises.

13.

Ans: percentage; percentage

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