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    Calculate price elasticity and explain step by step

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    Suppose the demand function is Q=100-P, where Q is the quantity demand and P is the price. Please calculate the price elasticity at P=10 (by comparing it with a pair of price and quantity at P=20). Calculate the change in total revenue which is P times Q moving from P=10 to P=20. Repeat the same exercise for P=70 versus P=80.

    please provide step by step.

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    Solution Preview

    (a) Q0 = 100 - P0 = 100 - 10 = 90, Q1 = 100 - P1 = 100 - 20 = 80

    Price Elasticity of demand =|[2(Q1 - Q0)/(Q1 + Q0)] / [2(P1 - P0)/(P1 + P0)]|

    = |[2(80 - 90)/(80 + 90)] / ...

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