Answer to Question #60165 in Microeconomics for jarvis
e = (dQ/Q) / (dP/P), therefore:
e = (-10/50) / (2/6) = -0.6;
-1 < e = -0.6 < 0; the demand for the good is inelastic
Total Revenue = Price x Quantity Demanded
before the increase in price:
Total Revenue1 = $6 x 50 = $300
Total Revenue2 = $8 x 40 = $320
As we may see from the above figures, the rise in price for the good led to the increased revenue. That happened because of the inelastic demand when the 33% rise in price ( dP/P = $2/$6 = 0.33 = 33%) caused demand to contract by only 20% (dQ/Q = 10/50 = 0.2 = 20%).
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