Danny "Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $2.5 each, he sells 100. At a price of $2 each, he sells 300.

Instructions:Use the midpoint method and round your answer to 2 decimal places. Do not include a minus sign.

a. What is the elasticity of demand?

b. Is demand elastic or inelastic over this price range?

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Elastic

Inelastic

c. If demand had the same elasticity for a price decline from $2 to $1.5 as it does for the decline from $2.5 to $2, would cutting the price from $2 to $1.5 increase or decrease Danny's total revenue?

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Increase

Decrease