2a. Elasticity and total revenue The following graph illustrates the weekly demand curve for motorized scooters in Madison. On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per scooter. 1460 1320 Total Revenue 1180 1040 900 TOTAL REVENUE (Dollars) 760 820 480 340 200 0 15 30 45 60 75 90 105 120 135 150 185 180 195 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 $45 per scooter, shown as point B on the initial graph. Because the demand between points A and B is , a $15-per-scooter increase 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 be2b. Application: Demand elasticity and agriculture The following graph illustrates the market for almonds. It plots the monthly supply of almonds and the monthly demand for almonds. Suppose a stretch of unseasonably good weather occurs, allowing almond growers to produce more almonds per hectare. Show the effect this shock has on the market for almonds by shifting the demand curve, supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. 30 O Supply Demand 24 18 Supply PRICE (Dollars per ton) 12 Demand 12 24 38 48 60 QUANTITY (Thousands of tons) A number of the growers are concerned about the price decrease initiated by the stretch of favorable weather conditions, as they believe it will lead to decreased revenue. Using elasticities, you will be able to determine whether this price change will lead to a rise or fall in total revenue in this market. Using the midpoint method, the price elasticity of demand for almonds between the price levels of $15 and $12 per ton is , meaning that between these two points, demand is . Thus, you can conclude that the grower's claim is , because total revenue will due to the favorable weather conditions