6. Elasticity and total revenue

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

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 Revenue0918273645546372819099108117260240220200180160140120100806040200PRICE (Dollars per scooter)QUANTITY (Scooters)DemandAB

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 Revenue0204060801001201401601802002202402605120480044804160384035203200288025602240TOTAL 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 $60 per scooter, shown as point B on the initial graph. Because the demand between points A and B is , a $20-per-scooter increase in price will lead to in total revenue per week.

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