Answer to Question #274688 in Economics for Chandan

Question

(3) Elasticity of Demand

For the linear demand p the demand is: = 13 0.05q, please find the price interval in which -

a Elastie

b) Inelastic

Unit elastic

d) Explain intuitively the meaning of increasing revenue on interval for which demand is elastic and decreasing revenue on interval for which demand is inelastic (50-100 words) (20 points)

Answer 1

a) The demand is elastic, when Ed > 1.

b) The demand is inelastic, when Ed < 1.

c) The demand is unit elastic, when Ed = 1.

d) If the price decrease, then the revenue will increase on interval for which demand is elastic, and decrease on interval for which demand is inelastic.