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What do you notice about the algebraic sign of the values you have just computed? Why is this so? www. Compute the coefficient of price elasticity for the price ranges given in the schedule and complete the first column of the table. b.com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades. Use this data to answer the following questions.classof1. . Price elasticity of demand Number of books demanded Price per book Total revenue 0 10 20 30 40 50 60 70 80 90 100 $20 18 16 14 12 10 8 6 4 2 0 a.Sub: Economics Estimate The Price Elasticity Coefficient Question: Topic: Micro Economics Given below is the demand schedule for books per year for a given family.

com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.111 -0. Graph the demand curve for books. e.5 0. How does total spending vary with the price of books in the inelastic range? g.333 -0.125 -0. Total spending attains a maximum value approximately in which range of price elasticity? h.143 0 -9 -4 -2. . Break the demand schedule into the three ranges of the price-elasticity of demand.) d. i. of books Price per Total book revenue Change in quantity Change in Price elasticity of demanded price demand demanded 0 10 20 30 40 20 18 16 14 12 0 180 320 420 480 0 1 0.333 www. How does total spending vary with the price of books in the elastic range? Why? f.1 -0. Explain why the price-elasticity of demand is not equal to the slope of a demand curve. Solution: No.$8 to $6.classof1. Interpret the coefficient of the price elasticity that you computed for the seventh price range. (You can only approximate the three ranges. Fill the total revenue (spending) column.Sub: Economics Topic: Micro Economics c.

5 -1 -1. The demand is said to be elastic range. The coefficient of price elasticity of demand for the given price changes is calculated as.429 -0. . Price elasticity of demand = % change in quantity demanded / % change in price % change in quantity demanded = New Qd – Old Qd / Old Qd % change in price = New P – Old P / Old P The calculated price elasticity coefficient is shown in the above table & attached excel sheet.5 -1 -0.143 0.Sub: Economics 50 60 70 80 90 100 10 8 6 4 2 0 500 480 420 320 180 0 0.125 0.667 -0. The algebraic sign of the price elasticity coefficient is found to be negative. the algebraic sign of the price elasticity coefficient is found to be negative.111 a). www.111 Topic: Micro Economics -0.2 0.com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades. the quantity demanded increases & vice versa.25 -0. Due to this inverse relation between the price & quantity demanded.167 0. The reason behind is that when price declines.167 -0. when the absolute value of the price elasticity is greater than one.333 -0.classof1.25 -0.2 -0. b). c).25 0.

666666667 Inelastic range -0. of books demanded 0 0 -9 Elastic range per book 20 18 16 14 12 10 8 6 4 2 0 10 20 30 40 50 60 70 80 90 100 -4 -2. The above three ranges of price elasticity of demand is shown in the below table.com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.000 -0. The total revenue column is shown in the above table. when the absolute value of the price elasticity is exactly equal to one. Price Price elasticity of demand No. . when the absolute value of the price elasticity is less than one The demand is said to be unitary elastic. www.333333333 Unitary Elastic range -1.5 -1.111 d).Sub: Economics Topic: Micro Economics The demand is said to be inelastic range.428571429 -0.classof1.250 -0.

So.classof1. the total spending increases with the decline in prices. when the price elasticity reaches a unitary elastic range.Sub: Economics Topic: Micro Economics e). www. In the elastic region. When demand is unitary elastic. i. In the inelastic range.e price decline will lead to an increase in demand & thereby increase the total spending.com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades. total spending decreases when the price declines. f). g) Total spending attains a maximum value. In the inelastic range. change in quantity demanded is same as the change in price. demand is not very sensitive to price changes & thus any decrease in price will lead to a decline in total spending. any decline in prices will lead to an increase in total spending as demand is highly sensitive to price changes. change in total spending is zero (MR = 0) & total spending attains a maximum. . When demand is elastic.

So elasticity varies along straight-line demand curve. quantity demanded increases from 60 to 70. It declines along the demand curve as we move toward the quantity axis. In this range. . The coefficient interprets that $1 decrease in price will lead to only 0. i). i. But the slope does not vary along a straight line – linear demand curve.Sub: Economics Topic: Micro Economics Demand curve 25 20 15 Price 10 5 0 0 20 40 60 80 100 120 Quantity demanded Demand curve h). This implies that percentage change in quantity demanded is less than the percentage change in price. When price declines from $8 to $6.com/homework-help/economics *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.classof1. the price elasticity coefficient is 0.elasticity measures the responsiveness of the quantity demanded for the change in prices.e demand is not highly sensitive to price changes & thus the coefficient is inelastic. www. Price .667 increase in quantity demanded.667.

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"a. Compute the coefficient of price elasticity for the price ranges given in the schedule and complete the first column of the table.
b. What do you notice about the algebraic sign of the values ...

"a. Compute the coefficient of price elasticity for the price ranges given in the schedule and complete the first column of the table.

b. What do you notice about the algebraic sign of the values you have just computed? Why is this so?

c. Break the demand schedule into the three ranges of the price-elasticity of demand. (You can only approximate the three ranges.)

d. Fill the total revenue (spending) column.

e. How does total spending vary with the price of books in the elastic range? Why?

f. How does total spending vary with the price of books in the inelastic range?

g. Total spending attains a maximum value approximately in which range of price elasticity?

h. Graph the demand curve for books. Explain why the price-elasticity of demand is not equal to the slope of a demand curve.

i. Interpret the coefficient of the price elasticity that you computed for the seventh price range- $8 to $6.

"

b. What do you notice about the algebraic sign of the values you have just computed? Why is this so?

c. Break the demand schedule into the three ranges of the price-elasticity of demand. (You can only approximate the three ranges.)

d. Fill the total revenue (spending) column.

e. How does total spending vary with the price of books in the elastic range? Why?

f. How does total spending vary with the price of books in the inelastic range?

g. Total spending attains a maximum value approximately in which range of price elasticity?

h. Graph the demand curve for books. Explain why the price-elasticity of demand is not equal to the slope of a demand curve.

i. Interpret the coefficient of the price elasticity that you computed for the seventh price range- $8 to $6.

"

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