Use the following demand schedule to calculate total revenue. For each price, indicate whether the

demand is elastic, unit elastic or inelastic.

Table $3$ Demand Schedule

Question $4$

Taxes imposed on petrol, tobacco products and alcohol are an important source of revenue for

governments in most countries. In Australia, these taxes are known as excise taxes. For a good with

inelastic demand, the tax burden will fall more heavily on the buyers. Explain why this is the case with

clear examples.

Question $5$

a$.$ Using the table, construct the cost schedule for a firm operating in the short run.

b$.$ Graph the average variable cost, average total cost and marginal cost curves.

Table $4$ Total, Marginal and Average Costs

Total

product

$($Q$)$

Total

fixed

cost

$($TFC$)$

Total

variable

cost

$($TVC$)$

Total

cost $($TC$)$

Marginal

cost

$($MC$)$

Average

fixed

cost

$($AFC$)$

Average

variable

cost

$($AVC$)$

Average

total

cost

$($ATC$)$

$0$ $$50$ $$0$ $$50$

$170$

$285$

$395$

$4100$

Price $($$$)$ Quantity demanded TR $($$$)$ Price elasticity of demand

$5\mathrm{.}00$

$4\mathrm{.}54$

$4\mathrm{.}08$

$3\mathrm{.}512$

$3\mathrm{.}016$

$2\mathrm{.}520$

$2\mathrm{.}024$

$1\mathrm{.}528$

$1\mathrm{.}032$

$0\mathrm{.}536$

$0\mathrm{.}040$