2. Elasticity and total revenue

The following graph illustrates the weekly demand curve for motorized scooters in Scottsdale.

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.

Total Revenue0 4 8 12 16 20 24 28 32 36 40 44 48 52

0 20 60 80 100 120 140 160 180 200 220 240 260 PRICE (Dollars per scooter) QUANTITY (Scooters)Demand AB

On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $40, $60, $80, $100, $120, $140, and $160 per scooter.

Total Revenue 0 20 40 60 80 100 120 140 160 180 200 220 240 260

1000 1140 1280 1420 1560 1700 1840 1980 2120 2260 2260 TOTAL REVENUE (Dollars)PRICE (Dollars per scooter)

According to the midpoint method, the price elasticity of demand between points A and B is approximately......?

Suppose the price of scooters is currently $160 per scooter, shown as point A on the initial graph. Because the demand between points A and B is ......? a $20-per-scooter decrease in price will lead to...? in total revenue per week.

In general, in order for a price decrease to cause a decrease in total revenue, demand must be ......? .