A sporting goods store has estimated the demand curve for a popular brand of running shoes as a function of price. Use the diagram to answer the questions that follow.

a. Calculate demand elasticity using the midpoint formula between points A and B, between points C and D, and between points E and F.

*On this problem, I already solved it by using the diagram that is illustrated in my textbook.* I just need help with problems b and c below. Thank you.

A and B

P1= 60 P2= 50 Q1= 100 Q2= 200

For Points A and B, I got -3.72 elastic as the answer.

C and D

P1= 40 P2= 30 Q1= 300 Q2= 400

For Points C and D, I got -1 unitary elastic as the answer.

E and F

P1= 20 P2= 10 Q1= 500 Q2= 600

For Points E and F, I got -0.27 inelastic as the answer.

b. If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P x Q before and after the price change)? Repeat the exercise for initial prices being decreased to $40 and $20, respectively.

c. Explain why the answers to a. can be used to predict the answers to b.

## Economics Help Asap-thanks :)?

May 22nd, 2013 admin