ECON 102 Lecture Notes - Lecture 14: Normal Good, Midpoint Method, P200

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27 Mar 2018

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If demand is elastic then price elasticity of demand is more than 1. % change in q > % change in p. The fall in revenue from lower q is greater than the increase in revenue from higher p so the revenue falls. If the elasticity demand = 1. 8, p=, q=12, and revenue =2400. There will be a lost revenue due to lower q. If the elasticity is 1. 8, p= , q=8, and r=. When d is elastic, a price increase cause revenue to fall. If demand is inelastic then the price elasticity of demand is less than 1. % change in q < % change in p. The fall in revenue from lower q is smaller than the increase in revenue from higher p so the revenue rises. If the elasticity is 0. 82, p= , q= 12, and r= . If the elasticity is 0. 82, p=250, q=10, and r= 2500.

Related Questions

From the scenario for Katrinaâs Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ÎTR = %ÎQ + %ÎP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Î in TR if ED is -.85 and the %ÎP is 10%?

lilaccattle807

1. Assume a monopoly has the following demand schedule:

Price (P) Quantity (Q)

$20 200

15 300

10 500

5 700

(a) Calculate total revenue (TR) at each P and Q combination.

(b) Calculate marginal revenue per unit for each decrease in price.

(c) For the change in price from $20 to $15, calculate the interval elasticity of demand. Is demand elastic or inelastic?

(d) For the change in price from $20 to $15, obtain the Lerner index.

aquamarinetiger116

1. Clothing retailers often use sales, where some or all products are sold at a discount price, to increase revenue. What does this suggest about the price elasticity of demand for retail clothing?

A) It is elastic.

B) It is inelastic.

C) It is unit elastic.

D) This tells us nothing about elasticity.

2. If demand is inelastic, then increasing price will do what to revenue?

A) It is impossible to say.

B) Decrease

C) Increase

D) Nothing will happen to revenue.

3. If P increases from 200 to 202 and Qd decreases from 50 to 49, what is the price elasticity of demand? ___

4. If elasticity (i.e. price elasticity of demand) is -3, a 1.5% increase in price would lead to what change in quantity demanded?

A) a decrease of 3%

B) a decrease of 4.5%

C) an increase of 1.5%

D) an increase of 3%

5. If you know that the demand curve is given by: Q = 20-2P What is the price elasticity of demand if P = 4?

A) -0.666

B) -0.33

C) -1.33

D) -1.66

ECON 102 Lecture Notes - Lecture 14: Normal Good, Midpoint Method, P200

ECON 102 Full Course Notes

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