Copy of 04. Elasticity and Revenue worksheet.docx - Elasticity Revenue worksheet Price Elasticity of Demand percentage change in PRICE ELASTICITY OF

Copy of 04. Elasticity and Revenue worksheet.docx -...

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Elasticity / Revenue worksheet Price Elasticity of Demand PRICE ELASTICITY OF DEMAND = percentage change in demand percentage change in price Use the formula above to calculate values of Price Elasticity for all the situations below: Price Quantity % change in quantity demanded % change in price Price Elasticity of Demand Initi al Ne w Initi al Ne w 25 30 100 40 -60% 20% 1. ___3________ 40 70 120 90 -25% 75% 2. ___1/3________ 200 220 80 64 -20% 10% 3. _____2______ 50 75 150 135 -10% 50% 4. _____1/5______ In each case identify whether you would describe it as elastic / unit elastic / inelastic 1. _________Elastic________________ 2. ________Inelastic_________________ 3. ____________Elastic_____________ 4. ____________Ine lastic _____________ Changes in Revenue To see the effect that elasticity has on total revenue fill in the table below: Price Quantity Revenue Change in Revenue Initi al Ne w Initi al Ne w Before price change After price change 25 30 100 40 2500 1200 1. ______-1300_____ 40 70 120 90 4800 6300 2. ____1500_______ 200 210 80 64 16000 13440 3. ___-2560________ 50 75 150 135 7500 10125 4. __2625_________ What determines E L A S T I C I T Y? As we have seen above it is important to a company to have an idea of the value of the elasticity of demand of its good or service as it will affect what happens to their total revenue as price changes.

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