Calculation of elasticity of demand and marginal revenue.
Use the following hypothetical demand schedule for tea to answer the following problem:
Quantity demanded/ week

Price/ Oz.

(Elasticity)

1,000 oz.

$5


800

10


600

15


400

20


200

25


a.Using the above demanded schedule, describe the elasticity of demand for each price change. (ex: when price changes from $5 to $10, quantity demanded changes from 1000 to 800 oz., so the elasticity of demand, using average values, is 1/3 or 0.33).
b.The data given in the demanded schedule would plot as a straight line demand curve. Illustrate why is demand more elastic the higher the price gets?