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    Chapter 03: Elasticity and Demand: Points A - F

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    Coleen Lara Sedilles
    The document summarizes key concepts about elasticity and linear demand curves. It provides: 1) The equation for a linear demand curve and how to calculate missing prices and quantities. 2) Formulas to compute interval, point, and arc elasticities at different points on the demand curve. 3) Information about how elasticity changes along the demand curve as quantity and price change. Specifically, that demand becomes less elastic as quantity increases and price decreases. 4) The equation for marginal revenue on the linear demand curve and how it relates to elasticity of demand.

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    Chapter 03: Elasticity and Demand: Points A - F

    Uploaded by

    Coleen Lara Sedilles
    22 views2 pages
    The document summarizes key concepts about elasticity and linear demand curves. It provides: 1) The equation for a linear demand curve and how to calculate missing prices and quantities. 2) Formulas to compute interval, point, and arc elasticities at different points on the demand curve. 3) Information about how elasticity changes along the demand curve as quantity and price change. Specifically, that demand becomes less elastic as quantity increases and price decreases. 4) The equation for marginal revenue on the linear demand curve and how it relates to elasticity of demand.

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    Third Homework for Managerial Economics by McGraw-Hill

    Original Title

    03 CH03 Elasticity and Demand

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    The document summarizes key concepts about elasticity and linear demand curves. It provides: 1) The equation for a linear demand curve and how to calculate missing prices and quantities. 2) Formulas to compute interval, point, and arc elasticities at different points on the demand curve. 3) Information about how elasticity changes along the demand curve as quantity and price change. Specifically, that demand becomes less elastic as quantity increases and price decreases. 4) The equation for marginal revenue on the linear demand curve and how it relates to elasticity of demand.

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    © All Rights Reserved
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    Download as pdf or txt
    22 views2 pages

    Chapter 03: Elasticity and Demand: Points A - F

    Uploaded by

    Coleen Lara Sedilles
    The document summarizes key concepts about elasticity and linear demand curves. It provides: 1) The equation for a linear demand curve and how to calculate missing prices and quantities. 2) Formulas to compute interval, point, and arc elasticities at different points on the demand curve. 3) Information about how elasticity changes along the demand curve as quantity and price change. Specifically, that demand becomes less elastic as quantity increases and price decreases. 4) The equation for marginal revenue on the linear demand curve and how it relates to elasticity of demand.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Coleen Lara Sedilles November 30, 2020

    BSA – II AE 205 – Managerial Economics

    Chapter 03: Elasticity and Demand


    5. Use the graph below of a linear demand curve to answer questions 5 and 6.
    a. The equation for the linear demand in the figure above is Qd = 6,250 – 125P.

    b. The equation for the inverse linear demand is P = 50 – 0.008Qd.

    c. Using the equations in parts a and b, find the missing prices and quantities at
    points A – F:
    A. P = 50 – 0.008(750) D. P = 50 – 0.008(3,250)
    P = $44 P = $24
    B. Q = 6,250 – 125(42) E. Q = 6,250 – 125(15)
    Q = 1,000 Q = 4, 375
    C. Q = 6,250 – 125(26) F. P = 50 – 0.008(5,000)
    Q = 3,000 P = $10

    d. Compute the following interval (or arc) elasticities:


    Interval of A to B:

    Interval of C to D:

    Interval of E to F:

    e. Compute the following point elasticities using the two formulas


    and :
    Point A:

    Point C

    Point E

    f. Demand is unitary elastic at a price of $25 and quantity of 3,125.


    g. As quantity increases along the demand curve, demand becomes less elastic.
    As price falls along the demand curve, demand becomes less elastic.
    6. Use the figure in question 5 to answer the following:
    a. The equation for marginal revenue is MR = 50 – 0.016Q.
    b. MR crosses the price-axis at P = $50. MR is zero at Q = 3,125.
    c. If MR is positive, then demand is elastic.
    d. If MR is zero, then demand is unitary elastic.
    e. If MR is negative, then demand is inelastic.

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