Question

1. When the price of good A increased from $90 to $110, the quantity demanded of

good A decreased from 350 units to 250 units.
a. What is the price elasticity of demand for good A?
b. Is the demand for A elastic or inelastic?
c. What is the effect on total revenue of this increase in price?

Answer 1

A = 1.88

B = Elastic demand

C = Fall in turnover by $4,000

Step-by-step explanation:

Elasticity demand is calculated with formula % change in demand / % change in price.

It is elastic if the result is greater than 1 , and inelastic if less than on.

The turnover dropped from $31,500 to $27, 500