Question

4. Elasticity and total revenue The following graph shows the daily demand curve for bippitybops in Dallas. 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. 240 Total Revenue 200 180 140 120 O 100 0 60 40 20 0 18 27 3 45 54 63 72 90 99 108 QUANTITY (Bippitybops) On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120 $140, and $160 per bippitybop.

Answer 1

Ans:

Explanation:

7660 7080 6500 5920 4 5340 4760 4180 3600 3020 Total Revenue 2440 0 20 40 60 80 100 120 140 160 180 200 220 240 PRICE ( Dollars per bippitybop)

Total revenue ( TR ) = Price * Quantity

Price ( $ )	Quantity	Total Revenue ( $ )
40	90	3600
60	81	4860
80	72	5760
100	63	6300
120	54	6480
140	45	6300
160	36	5760

Answer to first blank :   - 0.14 or 0.14  ( absolute value)

Explanation:

Initial price ( P1 ) =$40

New price ( P2 ) = $20

Initial quantity ( Q1 ) = 90

New quantity ( Q2) =99

PED  = ∆Q/∆P *( P1 + P2 / Q1 + Q2)

={ ( 99 - 90 ) / ( 20 - 40 ) } * { (40 + 20 ) / ( 90 + 99)

= ( 9 / -20 ) * ( 60 / 189)

= -0.45 * 0.3174

= - 0.14 or 0.14  ( absolute value)

Answer to second blank: less elastic

Answer to third blank: increase

Answer to fourth blank: inelastic