Given below is the demand schedule for books per year for a given family. Use this data to answer the following questions.
|
Price elasticity of demand
|
Number of books demanded
|
Price per book
|
Total revenue
|
|
|
0
|
$20
|
|
|
|
10
|
18
|
|
|
|
20
|
16
|
|
|
|
30
|
14
|
|
|
|
40
|
12
|
|
|
|
50
|
10
|
|
|
|
60
|
8
|
|
|
|
70
|
6
|
|
|
|
80
|
4
|
|
|
|
90
|
2
|
|
|
|
100
|
0
|
|
- Compute the coefficient of price elasticity for the price ranges given in the schedule and complete the first column of the table.
- What do you notice about the algebraic sign of the values you have just computed? Why is this so?
- Break the demand schedule into the three ranges of the price-elasticity of demand. (You can only approximate the three ranges.)
- Fill the total revenue (spending) column.
- How does total spending vary with the price of books in the elastic range? Why?
- How does total spending vary with the price of books in the inelastic range?
- Total spending attains a maximum value approximately in which range of price elasticity?
- Graph the demand curve for books. Explain why the price-elasticity of demand is not equal to the slope of a demand curve.
Interpret the coefficient of the price elasticity that you computed for the seventh price range- $8 to $6.