Answer questions 1 and 2 based on the following: Points Price Quantity A $10 15(
ID: 1199030 • Letter: A
Question
Answer questions 1 and 2 based on the following:
Points Price Quantity
A $10 15(units)
B 8 30
C 6 45
D 4 60
E 2 75
1. Given the above demand schedule, the price elasticity between points A and B is:
a. 0.66 b. 1.0 c. 2.0 d. 0.33 e. 3.0
2. The firm in order to increase revenue between points A and B in the above demand curve must:
a. increase price b. decrease price
c. keep price unchanged d. increase units sold e. decrease units sold
Explanation / Answer
1.
the price elasticity between points A and B (using price elasticity method)= %change in quantity between A and B / %change in price between A and B
=((30-15)/(15+30)/2) / ((8-10)/(10+8)/2)
= 0.67/0.22
= 3.0 (we ignore negative sign)
2.
decrease price
as it apperas in the above table.Because as the prices declines from 10 to 8, the revenues increases from 150 t 240.