05 Jun Question 1. Answer the following questions based on the accompanying diagram 16
Question
1. Answer the following questions based on the accompanying diagram
16
14
12
10
Price
8
6
4
2
0
0
1
2
3
4
5
6
7
Quantity
a. How much would the firms revenue change if it lowered the price from $12
to $10? Is demand elastic or inelastic in this range?
b. How much would the firms revenue change if it lowered the price from $4 to
$2? Is demand elastic or inelastic in this range?
c. What price maximizes the firms total revnues? What is the elasticity of
demand at this point on the demand curve?
4.
Suppose the own price elasticity of demand for good X is -3, its income
elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of
demand between it and good Y is -4. Determine how much the consumption
of this good will change if:
a.
b.
c.
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