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In Cleveland, Clive sells 15 cloves at a price of $5 each. If Clive lowers his price by 10%, to $4.50 per clove, he will sell 16, or 6.66% more. In Dallas, Della sells 15 cloves for $5 each. If Della lowers her price by 2%, to $4.90, she will sell 16 cloves, or 6.66% more.

a. Classify the demand curves that Clive and Della face as elastic or inelastic.

b. Determine the marginal revenue of the 16th unit for Clive. Then, compute the marginal revenue of the 16th unit for Della.

c. How does the marginal revenue received by a seller depend on the price elasticity of demand? Explain your answer.

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M92089477

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