Nrs429

6-2 (Key Question) Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment.

| | |

|Product |Quantity |

|Price |demanded |

| | | |

| | | |

|$5 | |1 |

|4 | |2 |

|3 | |3 |

|2 | |4 |

|1 | |5 |

| | | |

See the graph accompanying the answer to 6-3. Elasticities, top to bottom: 3; 1.4; .714; .333. Slope does not measure elasticity. This demand curve has a constant slope of -1 (= -1/1), but elasticity declines as we move down the curve. When the initial price is high and initial quantity is low, a unit change in price is a low percentage while a unit change in quantity is a high percentage change. The percentage change in quantity exceeds the percentage change in price, making demand elastic. When the initial price is low and initial quantity is high, a unit change in price is a high percentage change while a unit change in quantity is a low percentage change. The percentage change in quantity is less than the percentage change in price, making demand inelastic.

6-3 (Key Question) Calculate total-revenue data from the demand schedule in question 2. Graph total revenue below your demand curve. Generalize about the...