Elasticity of demand and marginal revenue

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Reference no: EM1313078

Use the following hypothetical demand schedule for tea to answer the following question:

Quantity demanded/ week

Price/ Oz.

(Elasticity)

1,000 oz.

$5

 

800

10

 

600

15

 

400

20

 

200

25

 

a. Using the above demanded schedule, determine the elasticity of demand for each price change. (Example: when price changes from $5 to $10, quantity demanded changes from 1000 to 800 oz., so the elasticity of demand, using average values, is 1/3 or 0.33).

b. The data given in the demanded schedule would plot as a straight line demand curve. Why is demand more elastic the higher the price gets?

Reference no: EM1313078

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