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Demand_Elasticity

# Demand_Elasticity - Q 0 10 20 30 40 50 60 70 80 90 100 P 5...

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Economics 1B Dr. Tom Means Class Exercise - #2 Fall 2006 Due 10/18/06 Name The problems below deal with demand schedules, demand elasticities, and total revenue schedules. 1. Suppose we have the following demand schedule for apples: Q = 100 - 20P, where Q is the quantity demanded of apples (in pounds) and P is the price(\$ per pound). (Hint: can you write out the demand schedule in terms of P: P = b – mQ) a. Calculate the demand price elasticity as the quantity demanded ranges from zero to 100(in increments of 10 units)? Hint: Δ Q/ Δ P = -20. Use the point formula

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Unformatted text preview: Q 0 10 20 30 40 50 60 70 80 90 100 P 5 2.5 0 e TR=PQ 0 125 0 b. Graph the total revenue schedule in increments of 10 units. Find the quantity that maximizes total revenue? What is the price elasticity at this quantity? 2. Suppose we have the following demand schedule: Q = 36/P. a. Graph this demand schedule. b. The ratio Δ Q/ Δ P equals -36/P 2 . Calculate the demand price elasticity for Q = 1, 2, 3, 4, 6, 8, 12, 18, 36? Do you notice anything peculiar about the elasticities at these points? c. Graph the total revenue schedule. Why does it have this shape?...
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Demand_Elasticity - Q 0 10 20 30 40 50 60 70 80 90 100 P 5...

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