A sporting goods store has estimated the demand curve for a popular brand of running shoes as
Question:
A sporting goods store has estimated the demand curve for a popular brand of running shoes as a function of price. Use the diagram to answer the questions that follow.
a. Calculate demand elasticity using the midpoint formula between points A and B, between points C and D, and between points E and F.
b. If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P x Q before and after the price change)?
Repeat the exercise for initial prices being decreased to $40 and $20, respectively.
c. Explain why the answers to a. can be used to predict the answers to b.
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a Lets calculate the demand elasticity using the midpoint formula for the given points Between point...View the full answer
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Related Book For 
Principles Of Economics
ISBN: 9781292294698
13th Global Edition
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
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