8. (10 points) Complete the following table regarding own price elasticity. Dema

Question

8. (10 points) Complete the following table regarding own price elasticity. Demand is said to be: The absolute value of If price goes up the elasticity is.... revenue... Elastic Unitary elastic nelastic 9. (15 points; 7.5 points each) Regarding own price elasticityBob's Beef sells 10,000 Bob Burgers per month at $5.00 each. The own price elasticity for a burger is estimated to be: e-a)-(la + a1+2)=-0.50. (R-Po)-([Rt P.]+2) Elasticity = If Bob increases the price of the burger by 1 dollar, then Bob will sell 1,651 fewer burgers: a. What will be the change in revenue that occurs due to this change in price? Show your work to get full b. Will consumers be better or worse off as a result of this price change? credit for your answer. 0

Explanation / Answer

(8)

(9)

(a) Revenue = Price x Quantity

When Price = $5, Quantity = 10,000 and Revenue = $5 x 10,000 = $50,000

When Price = $6, Quantity = 10,000 - 1,651 = 8,349 and Revenue = $6 x 8,349 = $50,094

Change in revenue = $50,094 - $50,000 = $94

(b) Since revenue increases after an increase in price, quantity sold has decreased at less-than proportionately than the percentage change in price. This means that consumers are better-off.

Demand is.... Absolute value of elasticity... If price goes up, Revenue... Elastic > 1 Decreases Unitary elastic = 1 Remains unchanged Inelastic < 1 Increases

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