When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, O 1. the price elasticity of demand for good A is 0.67, and an increase in price will result in an increase in total revenue for good A O2 the price elasticity of demand for good A is 1.50, and an increase in price will result in a decrease in total revenue for good A. O 3. the price elasticity of dema

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Question:

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, O 1. the price elasticity of demand for good A is 0.67, and an increase in price will result in an increase in total revenue for good A O2 the price elasticity of demand for good A is 1.50, and an increase in price will result in a decrease in total revenue for good A. O 3. the price elasticity of demand for good A is 1.50, and an increase in price will result in an increase in total revenue for good A O 4 the price elasticity of demand for good A is 0.67, and an increase in price will result in a decrease in total revenue for good A

Answers

Answer: The price elasticity of demand for good A is 0.67, and an increase in price will result in a increase in total revenue for good AExplanation:The following can be deduced form the question:P1 = $50P2 = $70 Q1 = 500 unitsQ2 = 400 unitsPercentage change in quantity = [Q2 - Q1 / (Q2 + Q1) ÷ 2 ] × 100Percentage change in price = [P2 - P1 / (P2 + P1) ÷ 2 ] × 100% change in quantity = (400 - 500)/(400 + 500)/2 × 100= -100/450 × 100= -22.22%% change on price = (70 - 50)/(70 + 50)/2 × 100= 20/60 × 100= 33Price elasticity of demand = % change in quantity / % change on price= -22.22 / 33= -0.67This means that a 1% change in price will lead to a 0.67% change in quantity demanded. As there was a price change, there'll be a little change in quantity demanded because demand is inelastic. Thereby, he increase in price will lead to an increase in the total revenue.Therefore, the price elasticity of demand for good A is 0.67, and an increase in price will result in an increase in total revenue for good A

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