3 Given the following data determine the elasticity coeffici

3. Given the following data, determine the elasticity coefficient using percentage change, mid-point, and Total Revenue; indicate whether demand is elastic or inelastic. {15 points) Quantity Price 1 %A | Mid-point! TR 2 80 70 60 50 40 30 1.00 90 .80 .70 .60 .50 lo ?

Solution

Answer : Table showing information

E_d ( % change method ) = % Change in qty demand/ % change in price

Mid point method = new qty - old qty/ new qty+ old qty/2 / new price - old price/ new price+ old price/2

TR = Price× Quantity

As Elasticity by mid point method and percentage change method is more than 1 which shows that demand is elastic with respect to price. As price decreases quantity demanded decreases at greater speed.

Quantity	Price	% change in elasticity	Mid point	TR
80	1.00	1.25	1.228	80
70	0.90	1.28	1.3078	63
60	0.80	1.338	1.38	48
50	0.70	1.400	1.44	35
40	0.60	1.500	1.57	24
30	0.50	-	-	15