Consider the market for a new CD, where the price is initially $11.00 and 16 thousand...
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Consider the market for a new CD, where the price is initially $11.00 and 16 thousand copies are sold, as indicated in the figure at point A. The music company is considering lowering the price to $10.00, at which price 20 thousand copies would be sold (Point B) Price (dollars per copy) 15- 14- 13 12- 11 10 2 0 12 16 20 24 28 32 36 40 44 48 52 58 60 Quantity (copies in 1000s) 1. If the price decreases from $11 to $10, how much does total revenue for this CD market change by? Leave your answers in numbers and make sure to pay attention to the sign. All work must be shown. (Breakdown of points: Numerical work = 1.5 points) 2. Using the midpoint formula, calculate the price elasticity of demand for the CDs between points A and B and comment on whether it is elastic or inelastic between these two prices. (Breakdown of points: 1 point for Numerical work + 0.5 point for whether Elastic/Inelastic-1.5 points) Consider the market for a new CD, where the price is initially $11.00 and 16 thousand copies are sold, as indicated in the figure at point A. The music company is considering lowering the price to $10.00, at which price 20 thousand copies would be sold (Point B) Price (dollars per copy) 15- 14- 13 12- 11 10 2 0 12 16 20 24 28 32 36 40 44 48 52 58 60 Quantity (copies in 1000s) 1. If the price decreases from $11 to $10, how much does total revenue for this CD market change by? Leave your answers in numbers and make sure to pay attention to the sign. All work must be shown. (Breakdown of points: Numerical work = 1.5 points) 2. Using the midpoint formula, calculate the price elasticity of demand for the CDs between points A and B and comment on whether it is elastic or inelastic between these two prices. (Breakdown of points: 1 point for Numerical work + 0.5 point for whether Elastic/Inelastic-1.5 points)
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