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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?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919523

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