Assume that, for a particular demand curve, when price rises from $50 to $60, total revenue falls from $8,750 to $7800.

(i) Based on this information, what is the quantity demanded at each price?

(4 marks)

(ii) Without calculating the coefficient of elasticity, is demand over this range elastic or inelastic? How do you know?

(3 marks)

Consider the market for bean sprouts (tauge), and answer the following questions:

i) Assume that bean sprouts are an inferior good. Suppose consumer incomes fall, and at the same time, an improvement in technology lowers

production costs. Show this in a demand and supply graph. If you have no other information, what will be the effect on the equilibrium price and

quantity?

(4 marks)

ii) Now assume you have the additional information that the change in consumer incomes has been relatively small, while the reduction in

production costs has been relatively large. How would this change your answer to (a)? Support your answer with demand and supply curves.

(4 marks)