Assume that, for a particular demand curve, when price rises from $50 to $60, total revenue falls from $8,750 to $7800
a. Based on this information, what is the quantity demanded at each price.
b. Without calculating the coefficient of elasticity, is demand over this range elastic or inelastic? How do you know?
a. When price is $50, quantity demanded is $8750/$50 = 175. When price is $60, quantity demanded is $7800/$60 = 130.
b. Demand is elastic. When price increases from $50 to $60, total revenue decreases. Thus, the decrease in quantity dominates the increase in price, indicating that the percentage in quantity demanded is greater than the percentage change in price and the absolute value of the elasticity coefficient is greater than 1.
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