PROBLEM: ELASTICITY OF DEMAND

QUESTION

PROBLEM: ELASTICITY OF DEMAND [Ed]

1. Question: Why does a business need to understand
elasticity of demand? 2pts

2. The schedule below is for Beer
Price Quantity
Demand
$3 3

6 24

8 16
12
14
Calculate
the elasticity of demand between prices $6 to $8
SHOW
ALL WORK

3. State if the Ed is elastic, inelastic, or
unit elastic based upon your calculations. [1 PT]

4.
If price were lowered (given the elasticity of demand) what would happen
to
total revenues? GIVE AN EXPLANATION [2 pts]

5.
If research proved that malt in beer prolonged life would consumers change
their consumption of beer? Explain your
answer [2]

6.
Draw the demand curve and then indicate on the graph this change
State
whether this is a œChange in Demand or a Change in Quantity Demanded [(hint)
Do you move along the curve or construct a new demand curve [2] Note: If you cannot send the graph then draw the
graph with the changes and then explain the changes clearly and concisely.

ANSWER

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