Assignment: Price Elasticity and Total Revenue
This table illustrates the monthly demand schedule for Betty's Burlap Baggage (BBB), a "one size fits all uses" travel bag.
|
Price
|
Quantity
|
Price
Elasticity
|
Total
Revenue
|
|
20
|
100
|
xxx
|
|
|
18
|
150
|
|
|
|
16
|
200
|
|
|
|
14
|
250
|
|
|
|
12
|
300
|
|
|
|
10
|
350
|
|
|
|
8
|
400
|
|
|
a. Plot the demand curve in the figure.
b. Fill in the price elasticity column, using the mid-points formula. Use absolute values, and round all calculations to the nearest tenth (.1)
c. Fill in the total revenue column.
1. The price elasticity of demand between $18 and $16 is?
2. Between $18 and $16, is the demand for Betty's baggage elastic, inelastic, or unitarily elastic?
3. What happens to the price elasticity of demand as price falls? (increases, decreases, or doesn't change)
4. The price elasticity of demand between $10 and $8 is?.
5. Between $10 and $8, is the demand for Betty's baggage elastic, inelastic, or unitarily elastic?
6. What is Betty's total revenue when she sells her bags at $12 each?
7. When Betty is on the elastic portion of her demand curve, what happens to total revenue when she raises the price of her bags? (increases, decreases, or doesn't change)
8. When Betty is on the inelastic portion of her demand curve, what happens to total revenue when she raises the price of her bags? (increases, decreases, or doesn't change)
Use these figures to help you answer the following questions.
9. The Denver Broncos always have a sell out crowd at their 75,000 seat Mile High Stadium in Denver, Colorado. Which of the figures best represents the supply curve for Broncos tickets at Mile High Stadium?
10. What is the value of the price elasticity of supply in question nine?
11. Connie runs a small contracting firm. She finds that the market price for a new family room addition is $4000.00 and that she can sell as many of these room additions as she desires at this price. Whir.b of the figures best represents the demand curve for room additions facing Connie's firm?
12. What is the value of the price elasticity of demand in question eleven?