Suppose that you have been hired as an economic consultant by Total Company and given the following schedule showing the world demand for oil:

Price (K/Littre) Quantity Demanded (millions of littres/day)

10 60

20 50

30 40

40 30

50 20

Your advice is needed on the following questions:

I.If the price rises from K20 to K30 a Littre, will the total revenue from oil sales increase or decrease?

II.What will happen to total revenue if the supply of oil is decreased further and the price rises to K40 a Littre?

III.What is the price that will achieve the highest total revenue?

IV.What quantity of oil will be sold at the answer to (III)?

V.What are the values of the price elasticity of demand for price changes of K10 a Littre at average prices of K15 and K45?

VI.What is the elasticity of demand that maximizes total revenue?

VII.Over what range of prices is the demand for oil inelastic?