Arc Ed = [(Qd2 Qd1) / midpoint Qd] [(P2 P1) / midpoint P]

Elasticity of Demand and Impact of Price Change on Total revenue 660 TOT Assume the following price and quantity observations apply for the demand curve facing a firm selling a farm input: uogens P1 P2 P3 $500 $600 $700 $800 Q1 = Q2 = Q3 = Q4 = 60 50 20 10 0 P4 IS 1. (6 pts) Situation A: What is the arc price elasticity of demand between prices P1 and P2? Show your work 2. (6 pts) Situation B: What is the arc price elasticity of demand between prices P3 and P4? Show your work 3. (6 pts) For Situation A would Total Revenue increase or decrease with a 1% higher price? Total Revenue would: Show your work 4. (6 pts) For Situation B would Total Revenue increase or decrease with a 1% higher price? Total Revenue would: Show your work