Answers to Study Questions Set 4

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Answers to Study Questions Set 4 Chapter 4 Question 3 The following data shows the relationship between price and quantity demanded at four different prices for a product: P = \$11, Q d = 16 P = \$9, Q d = 24 P = \$7, Q d = 32 P = \$5, Q d = 40 Using the midpoints formula, what is the price elasticity of demand between: (a) \$11 and \$9; (b) \$9 and \$7; (c) \$7 and \$5? (a) 2.0; (b) 1.2; (c) 0.67 Chapter 4 Question 5 ( Key Question ) How would the following changes in price affect total revenue. That is, would total revenue increase, decline, or remain unchanged? a. Price falls and demand is inelastic. b. Price rises and demand is elastic. c. Price rises and supply is elastic. d. Price rises and supply is inelastic. e. Price rises and demand is inelastic. f. Price falls and demand is elastic. g. Price falls and demand is of unit elasticity. Total revenue would increase in (c), (d), (e), and (f); decrease in (a) and (b); and remain the same in (g). Chapter 4 Question 8

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