I can not figure out how to solve this please help! Data for the market for grah
ID: 1179621 • Letter: I
Question
I can not figure out how to solve this please help!
Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.
Price of crackers
Quantity Demanded (per month)
$3
80
$2.5
120
$2
160
$1.5
200
$1
240
$1.00 - $1.50: ___________________________________
$1.50 - $2.00: ___________________________________
$2.00 - $2.50: ___________________________________
$2.50 - $3.00: ___________________________________
If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.
Price of crackers
Quantity Demanded (per month)
$3
80
$2.5
120
$2
160
$1.5
200
$1
240
I can not figure out how to solve this please help! Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices. $1.00 - $1.50: ___________________________________ $1.50 - $2.00: ___________________________________ $2.00 - $2.50: ___________________________________ $2.50 - $3.00: ___________________________________ If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.Explanation / Answer
Elasticity of demand = %change in Q/%change in Price =
$1.00 - $1.50:
Elasticity of demand =(( 200-240)/240)/((1.5-1)/1) =-0.33
$1.50 - $2.00
Elasticity of demand =(( 160-200)/200)/((2-1.5)/1.5) =-0.60
$2.00 - $2.50
Elasticity of demand =(( 120-160)/160)/((2.5-2)/2) =-1.00
$2.50 - $3.00:
Elasticity of demand =(( 80-120)/120)/((3-2.5)/2.5) =-1.67
total revenue is maximized at the combination of price and quantity demanded where the elasticity of demand is unitary
threfore, price should be decrease to $2 to maximize revenue
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