In part a) graph the demand schedule shown below for Energy Bars facing an individual firm. Then using the mid-point formula, complete the table by calculating Ed to determine the price elasticity of demand for each of the six possible $1.00 price changes (3 decimal points). Indicate if demand is inelastic, unitary (unit) or elastic in the table and on the graph.
|
Price per Energy Bar |
Quantity Demanded (1,000s) |
Ed |
|
Elasticity |
|
$1.20
|
7.5 |
|
|
|
|
$2.20
|
6.5 |
|
|
|
|
$3.20
|
5.5 |
|
|
|
|
$4.20
|
4.5 |
|
|
|
|
$5.20
|
3.5 |
|
|
|
|
$6.20
|
2.5 |
|
|
|
|
$7.20 |
1.5 |
|
|
|
b. Graph the Demand curve here
c. Show your calculations for Ed over the price change from $6.20 to $5.20.
d. At what price level(s) is will this firm maximize Total Revenue? Explain your answer.