Consider the following demand schedule: Price Quantity $12 .. 5 $10 ..10 $5 .20 $3 .30 a.
Question:
Price Quantity
$12 ……………….. 5
$10 ………………..10
$5 ………………….20
$3 ………………….30
a. Use the midpoint formula to calculate the elasticity of demand when price rises from
i. $3 to $5
ii. $5 to $10
iii. $10 to $12
b. When price rises from $3 to $5, does expenditure rise, fall, or remain constant? What about when price rises from $5 to $10? When price rises from $10 to $12?
c. Why should you have anticipated your answers to (b) once you had answered part (a)?
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