Attempts: Keep the Highest: /4 6. Elasticity and total revenue The following graph shows the daily demand curve for bikes in New York City. 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. 300 275 Total Revenue 225 175 PRICE (Dollars per bike) 125 100 75 ? 300 275 250 Total Revenue 225 200 *4 175 + PRICE (Dollars per bike) 150+ 125+ 100+ wy 75 50 + 25+ Demand 0 0 10 20 30 90 100 110 120 40 50 60 70 QUANTITY (Bikes) On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $50, $75, $100, $125, $150, $175, and $200 per bike. 10600 9800 9000 + Total Revenue 8200 + 7400 TOTAL REVENUE (Dollars) 6600 5800 5000 4200 3400 0 25 50 75 100 125 150 175 200 225 250 275 300 PRICE (Dollars per bike) According to the midpoint method, the price elasticity of demand between points A and B is approximately 7400 6600 TOTAL REVENUE 5800 5000 + 4200 + 3400 + 0 25 50 75 100 125 150 175 200 225 250 275 300 PRICE (Dollars per bike) According to the midpoint method, the price elasticity of demand between points A and B is approximately Suppose the price of bikes is currently $200 per bike, shown as point A on the initial graph. Because the demand between points A and B is a $25-per-bike decrease in price will lead to in total revenue per day. In general, in order for a price increase to cause a decrease in total revenue, demand must be