Q2-Q1) (P2-P) (P2+ P1)/2 A. Using the total receipts test, determine whether the
ID: 1140373 • Letter: Q
Question
Q2-Q1) (P2-P) (P2+ P1)/2 A. Using the total receipts test, determine whether the following goods are elastic, inelastic or unit elastic: 1. Price rises from 50 to 60 and quantity falls from 210 to 100. 2. Price rises from 36 to 55 and quantity rises from 10 to 11 3. Price falls from 4 to 2 and quantity rises from 20 to 40 4. Price rises from 3 to 4 and quantity falls from 34 to 30. B. Using the mid-point formula and the chart below, determine whether the following elastic, inelastic or unit elastic Price 16 12 10 Quantity Demanded 600 900 1000 2500 1. price goes from 16 to 12 2. price goes from 12 to 10 3. price goes from 10 to 8 4. Why is it important for a producer of a product to know the price elasticity of demand? Number of workers uct 18 19 18 MP (change of TP/change in number of workers)lExplanation / Answer
Q3. A. Under total receipts test, when price and total receipts move in inverse direction, the demand is elastic. When the price and total receipts move in same direction, the demand is inelastic. When there is no change in total reciepts with the change in price, the demand is unit elasstic. Hence, 1. Price rises from 50 to 60 and qty falls from 210 to 100. Total receipts falls with increase in price. Demand is ELASTIC 2. Price rises from 36 to 55 and qty rises from 10 to 11. Total receipts increasse with increase in price. Demand is INELASTIC 3. Price falls from 4 to 2 and qty rise from 20 to 40. Total receipts remain same. Demand is UNIT ELASTIC 4. Price rises from 3 to 4 and qty falls from 34 to 30. Total receipts increae with rise in pricess. Demand is INELASTIC Q3. B. 1. Price from 16 to 12. Change in price: - 4 Average price: 14 % change in price = -4 /14 *100 = -28.57% Change in demand: 300 Average demand: 750 % change in demand: 300/750 = 40% Price elasticity: % change in demand/ % change in price 40% / -28.57% = -1.40 2. Price from 12 to 10. Change in price: - 2 Average price: 11 % change in price = -2 /11 *100 = -18.18% Change in demand: 100 Average demand: 950 % change in demand: 100/950 = 10.53% Price elasticity: % change in demand/ % change in price 10.53% / -18.18% = 0.58 3. Price from 10 to 8 Change in price: - 2 Average price: 9 % change in price = -2 /9 *100 = -22.22% Change in demand: 1500 Average demand: 1750 % change in demand: 1500/1750 = 85.71% Price elasticity: % change in demand/ % change in price 85.71% / -22.22% = -3.86 4. It is important to know the price elasticity for the producer to know the nature of demand of product to fix the prices of the product so that the demand will not be affected with the price which will ultimately affect the total revenue.
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