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Macroeconomics: Elasticity, Demand, and Total Revenue

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Prepare an analysis by answering the questions below. Be sure to cite your references using APA format.

Demand Schedule for Barbeque Dinners

Price Quantity Demanded Total Revenue Elasticity Coefficient Elastic or Inelastic
$4 100
__________ XXXX XXXX
6 80
__________ __________ __________
8 60
__________ __________ __________
10 40
__________ __________ __________
12 20
__________ __________ __________
14 1
__________ __________ __________

Calculate the total revenue for each level of demand.

Using the midpoints formula presented in the text, calculate the elasticity coefficient for each price level, starting with the coefficient for the $4 to $6 level. For each coefficient, indicate what type of elasticity is indicated, elastic demand, inelastic demand, or unitary demand.

Define elastic, inelastic, and unitary elasticity means. How are these related to total revenue?

Explain how the elasticity changes as price increases. Why is this happening?

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Demand Schedule for Barbeque Dinners
Price Quantity Demanded Total Revenue Elasticity Coefficient Elastic or Inelastic
$4 100 __________ XXXX XXXX
6 80 __________ __________ __________
8 60 __________ __________ __________
10 40 __________ __________ __________
12 20 __________ __________ __________
14 1 __________ __________ __________

A. Calculate the total revenue for each level of demand.
See the following table for calculations.

Total Revenue = Price * Quantity Demanded
Price Quantity Demanded Total Revenue Elasticity Coefficient Elastic or Inelastic
$4 100 $400 XXXX XXXX
6 80 $480 -0.56 Inelastic
8 60 $480 -1.00 Unitary
10 40 $400 -1.80 Elastic
12 20 $240 -3.67 Elastic
14 1 $14 ...

Solution Summary

Elasticity, Demand, and Total Revenue are determined. This solution defines the terms elastic, inelastic and unitary elasticity and how they relate to total revenue. The solution also explains how the elasticity changes as price increases. The total solution is 513 words.

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See Also This Related BrainMass Solution

Managerial Economics - Elasticity Concepts

You have taken a job as pricing manager for a very fine men's clothing line that sells high-end, tailored shirts, suits, etc. The firm is interested in increasing its revenues. Because it is a "high-end" clothier, your boss does not what to have a "sale" on shirts or sweaters; he would actually rather increase the prices on either the firm's tailored shirts or the firm's hand-knit sweaters.

You know that depending on the elasticity of demand, it is possible to increase the prices for shirts or sweaters, sell fewer units but actually increase your revenues.

The last time you increased the prices on your shirts and sweaters, the shirts went from $300 each to $320 each and the sweaters went from $400 each to $430 each.

The corresponding change in demand was: Shirts dropped from an average sales of 260 a month to 242, while sweaters dropped from an average sales of 200 a month to 188.

Calculate the price elasticity of demand for shirts and sweaters.

Which one, shirts or sweaters, has a demand elasticity that will allow you to increase the price, sell fewer units BUT still increase your revenues?

Take what was chosen and increase the price 10% from the current price (the current price is $320 for shirts and $430 for sweaters) and show the new quantity demanded at that price as we did in class. Also, show that the new total revenue will be greater than then old total revenue.

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