The following graph shows the daily demand curve for bikes in San Diego. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph.
The following graph shows the daily demand curve for bikes in San Diego. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...
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Question
![6. Elasticity and total revenue
The following graph shows the daily demand curve for bikes in San Diego.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
240
220
200
Total Revenue
180
160
* 140
120
100
80
60
40
20
Demand
18
27
36
45
54
63
72
81
90
108
QUANTITY (Bikes)
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120,
$140, and $160 per bike.
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120,
$140, and $160 per bike.
6250
5820
Total Revenue
5390
4960
w 4530
4100
3670
3240
2810
2380
0.47
80 100 120 140 160 180 200 220 240
PRICE (Dollars per bike)
20
40
60
2.14
31.5
According to the midpoint method, the price elasticity of demand between points A and B is approximately
Suppose the price of bikes is currently $60 per bike, shown as point B on the initial graph. Because the demand between points A and B is
inelastic
,a $20-per-bike increase in price will lead to an increase v in total revenue per day.
In general, in order for a price decrease to cause a decrease in total revenue, demand must be inelastic
TOTAL REVENUE (Dollars)
PRICE (Dollars per bike)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1265a4dd-3566-4220-9224-2b7b5393684d%2Fc5704a62-2c01-4aa0-9b18-1bf2dc773b43%2F8vf5ezj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:6. Elasticity and total revenue
The following graph shows the daily demand curve for bikes in San Diego.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
240
220
200
Total Revenue
180
160
* 140
120
100
80
60
40
20
Demand
18
27
36
45
54
63
72
81
90
108
QUANTITY (Bikes)
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120,
$140, and $160 per bike.
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $40, $60, $80, $100, $120,
$140, and $160 per bike.
6250
5820
Total Revenue
5390
4960
w 4530
4100
3670
3240
2810
2380
0.47
80 100 120 140 160 180 200 220 240
PRICE (Dollars per bike)
20
40
60
2.14
31.5
According to the midpoint method, the price elasticity of demand between points A and B is approximately
Suppose the price of bikes is currently $60 per bike, shown as point B on the initial graph. Because the demand between points A and B is
inelastic
,a $20-per-bike increase in price will lead to an increase v in total revenue per day.
In general, in order for a price decrease to cause a decrease in total revenue, demand must be inelastic
TOTAL REVENUE (Dollars)
PRICE (Dollars per bike)
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