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We R' Write has made some changes over the last year, hoping to increase total revenues generated. Specifically, We R' Write increased the price of

We R' Write has made some changes over the last year, hoping to increase total revenues generated. Specifically, We R' Write increased the price of their pencils and decreased the price of their pens. However, We R' Write has seen total revenues actually go down. Given the information in the table below, complete the following:

  • Calculate the price elasticity of demand for pencils and pens.
  • Interpret the price elasticity of demand for pencils and pens.
  • Indicate if the demand for pencils is price elastic, inelastic, or unit.
  • Indicate if the demand for pens is price elastic, inelastic, or unit.
  • Tell We R' Write if the decision to decrease the price of pencils was correct or not, and why.
  • Tell We R' Write if the decision to increase the price of pens was correct or not, and why.

Price

Quantity Demanded

Item

Last

Year

This

Year

Last

Month

This

Month

Pencils

$0.30

$0.25

25,000

62,000

Pens

$3.00

$3.50

77,000

30,000

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