1.A sporting goods store has estimated the demand curve for a popular brand of running shoes as a function of price. Use the diagram to answer the questions that follow.

a. Calculate demand elasticity using the midpoint formula between points and , between points and , and between points and .

b. If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate before and after the price change)? Repeat the exercise for initial prices being decreased to $40 and $20, respectively.

c. Explain why the answers to

a. can be used to predict the answers to b.

Transcribed Image Text:

Price per pair (S) 70 60 50 40 30 20 10 A 0 B D E Demand 100 200 300 400 500 600 Shoe sales per week