Question

(18 pts) Fill in the blanks in the table below (Use the midpoint formula to compute elas ticity values ) and finish the last two questions based on the table. (a) (14 pts) Fill in the blanks in the table below Price Quantity demanded Total Percent Change Percentage Change Price Elasticity Revenue in Price (%) in Quantity (%) (Absolute Value) 1 18 200 -22.2 0 13.3 22.2 -40 18 15.4 -200 (b) (2 pts) When the elasticity ép > 1: if the price increases, does the total revenue increase, decrease, or remain unchanged? (c) (2 pts) When the elasticity Ep <1: if the price increases, does the total revenue increase, decrease, or remain unchanged?

Answer 1

Percent Change in price = (Change in price / Average of total price)*100

Example :

Percentage change in price = ((1-0)/((1+0)/2))*100

Percentage change in price = (1/0.5)*100 = 200

Similarly percentage change in quantity = (change in quantity/ average of total quantity)*100

Prcie	Quantity	% Change in price (3)	% Change in quantity (4)	Total Revenue	Price Elasticity = (4)/(3)
0	22	-	-	0	-
1	18	200	-20	18	-0.1
2	15	66.67	-18.18	30	-0.3
3	12	40	-22.22	36	-0.6
4	9	28.57	-28.57	36	-1
5	6	22.22	-40	30	-1.8
6	3	18.18	-66.67	18	-3.7
7	0	15.4	-200	0	-13.4

b) If the price elasticity of the demand is greater than one any increase in price will decrease the total revenue as the supply curve will shift left.

Answer: Decrease

C) If the price elasticity of demand is less than one any increase in price Will shift the supply curve thus revenue increases

Answer: Increase