2. Elasticity and total revenue
The following graph illustrates the weekly demand curve for motorized scooters in Wilmington.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
Total Revenue
0
9
18
27
36
45
54
63
72
81
90
99
108
117
325
300
275
250
225
200
175
150
125
100
75
50
25
0
PRICE (Dollars per scooter)
QUANTITY (Scooters)
Demand
A
B
On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $50, $75, $100, $125, $150, $175, and $200 per scooter.
Total Revenue
0
25
50
75
100
125
150
175
200
225
250
275
300
325
7830
7290
6750
6210
5670
5130
4590
4050
3510
2970
TOTAL REVENUE (Dollars)
PRICE (Dollars per scooter)
According to the midpoint method, the price elasticity of demand between points A and B is approximately .
Suppose the price of scooters is currently $25 per scooter, shown as point B on the initial graph. Because the demand between points A and B is , a $25-per-scooter increase in price will lead to in total revenue per week.
In general, in order for a price decrease to cause a decrease in total revenue, demand must be .
