a. Fill in the table and calculate the price elasticity of
demand over each price range. Be sure to use average
prices and quantities when computing the percentage
changes.
b. Plot the demand curve and show the elasticities over the
different ranges of the curve.
c. Explain why demand is more elastic at the higher prices.
11. Suppose you are advising an industry association on the
predicted effects of a price change on quantity demanded and
total expenditure on their product. The current price is $1.00 per
unit, and quantity demanded is 2500 units per day. Based on
extensive empirical studies, you know that price elasticity of
demand for the product is 0.5. If the price increases to $2.00 per
unit, what is the predicted percentage change in quantity
demanded? Will total expenditure increase or decrease?
(Remember to use the averaging method to calculate the
percentage change in price.)
12. The following table shows the demand schedule for video games.
Price (per
unit)Quantity Demanded
(per year)Total
Expenditure