Question
1. In part a) graph the demand schedule shown below for Energy Bars facing an individual firm. Then using the mid-point formula, complete the table
1. In part a) graph the demand schedule shown below for Energy Bars facing an individual firm. Then using the mid-point formula, complete the table by calculating Ed to determine the price elasticity of demand for each of the six possible $1.00 price changes (3 decimal points). Indicate if demand is inelastic, unitary (unit) or elastic in the table and on the graph. (7 Marks for the table)
Price per Energy Bar | Quantity Demanded (1,000s) | Ed | Elasticity |
$1.20 | 7.5 | ||
$2.20 | 6.5 | ||
$3.20 | 5.5 | ||
$4.20 | 4.5 | ||
$5.20 | 3.5 | ||
$6.20 | 2.5 | ||
$7.20 | 1.5 |
Graph the Demand curve here (3 Marks)
b. Show your calculations for Edover the price change from $6.20 to $5.20. (3 Marks)
c.At what price level(s) is will this firm maximize Total Revenue? Explain your answer. (3 Marks)
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