Question
Calculate the price elasticity of demand when the price decreases from $10 to $8 and also the price decreases from $6 to $4 using the
Calculate the price elasticity of demand when the price decreases from $10 to $8 and also the price decreases from $6 to $4 using the mid-point method. Classify the product over these two price ranges and compute the changes in total revenue over the price ranges. Based on your answers, explain the relationship between revenue and the price elasticity of demand and discuss how the producer should change prices to earn more revenue.
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Introductory Econometrics A Modern Approach
Authors: Jeffrey M. Wooldridge
4th edition
978-0324581621, 324581629, 324660545, 978-0324660548
