Imagine a linear demand curve graphed with Quantity on the x-axis and Price on t
ID: 1163080 • Letter: I
Question
Imagine a linear demand curve graphed with Quantity on the x-axis and Price on the y-axis. We know the middle of the curve is the unit elastic point. Why is this point signifcant? That's the point where total revenue is maximized ? That's the point where consumers will not respond at all to a change in price O That's the point where consumers are completely responsive to a change in price O More than one answer is correct D Question 8 1 pts The price of milk decreased from $3 to $2.50, and the quantity demanded increased by 15%. What is the price elasticity of demand? (use the midpoint formula) 0.82 0.5 1.22 0.33 e janes pic.html Ae (4 unread) ericb... .html IMG 0926JPGExplanation / Answer
Answer 1:
Option A.
At the point where demand elasticity of the product is unit elastic, total product of the firm is maximized. This is because marginal product of the firm becomes negative below the mid point of the demand curve where price elasticity of demand is inelastic.
Answer 2:
Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price =15 / 2.50 - 3 / 3 = 0.82. Thus, option A is correct.