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The variation in elasticity and total revenue along a demand curve The following graph shows the daily demand curve for applybos in Chicago Lee the gran rectangle (trage symbols) to compute total af various prices for the demand curve Note: You will not be graded any changes made to this graph
The variation in elasticity and total revenue along a demand curve The following graph shows the daily demand curve for applybos in Chicago Lee the gran rectangle (trage symbols) to compute total af various prices for the demand curve Note: You will not be graded any changes made to this graph. 100 Total PRICE (Dolunperlappitypl . 70 QUANTITY a pery Calculate the daily total where the market price is $90, S80, 570, $60, $50, 540, 530, and $20 per by bop. Then, the great point (Ersangle symbol) to ploe the daily Total ringt quantity corresponding to these market prices on the following graph. 2200 o amor TOTAL REVENUED 000 200 70 100 QUANTITY According to the midpoints formula, the price elasticity of demand between points A and B on the initial graph is approximately Suppose the price of bippilybops is currently $30 per bippitybop, shown a point on the initial graph. Because the price elasticity of demand bet pons A and Bis a 510-per-bippilybop decrease in price will lead to in totale day. In general, in order for a price increase to an increase in total, durand must be
Expert Solution
| Price | Quantity demanded | Total Revenue |
| 90 | 0 | 0 |
| 80 | 10 | 800 |
| 70 | 20 | 1400 |
| 60 | 30 | 1800 |
| 50 | 40 | 2000 |
| 40 | 50 | 2000 |
| 30 | 60 | 1800 |
| 20 | 70 | 1400 |
Using mid - point formula:{(Q2 - Q1) / [(Q2 + Q1) / 2]} / {(P2 - P1) / [(P2 + P1) / 2]}
P1 = 30
P2 = 20
Q1 = 60
Q2 = 70
Uisng mid - point formula:{(70 - 60) / [(70 + 60) / 2]} / {(20 - 30) / [(20 + 30) / 2]} = -0.38. Absolute value of elasticity of demand is 0.38
Because the price elasticity of demand between point A and B is inelastic, a $10 decrease in price will lead to decrease in total revenue.
In general, in order for a price increase to increase the total revenue, demand must be inelastic.
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