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1 January, 01:09

1. When the price of good A increased from $90 to $110, the quantity demanded of

good A decreased from 350 units to 250 units.

a. What is the price elasticity of demand for good A?

b. Is the demand for A elastic or inelastic?

c. What is the effect on total revenue of this increase in price?

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Answers (1)
  1. 1 January, 01:21
    0
    A = 1.88

    B = Elastic demand

    C = Fall in turnover by $4,000

    Explanation:

    Elasticity demand is calculated with formula % change in demand / % change in price.

    It is elastic if the result is greater than 1, and inelastic if less than on.

    The turnover dropped from $31,500 to $27, 500
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