Refer to the following figure: -At a price of $1, the point elasticity of demand for D₂ is ________ and marginal revenue is _______. A)-5; positive B) -0.5; negative C)-0.2; negative D) -1; zero

Question

Quizplus · Accepted Answer

From the figure, we can see that at a price of $1, the quantity demanded for D₂ is 5 units. The point elasticity of demand can be calculated using the formula: (point elasticity of demand) = (% change in quantity demanded) / (% change in price) We can estimate the percentage change in quantity demanded by looking at the change in quantity from a price of $1 to a price slightly lower than $1, say $0.80 (as shown in the figure). The quantity demanded increases from 5 units to 6 units, which is a 20% increase. Similarly, we can estimate the percentage change in price by looking at the change in price from $1 to slightly higher than $1, say $1.20. The price change is 20%. Substituting these values in the formula, we get: (point elasticity of demand) = (20 / -20) * (5 / 6) = -0.2 * 0.83 = -0.166 So, the point elasticity of demand is -0.166. To determine the marginal revenue, we look at the slope of the total revenue curve at a quantity of 5 units (corresponding to a price of $1). The slope is negative, indicating that marginal revenue is negative. Therefore, the correct answer is C: F1F1F1S1F1F1F100.2; negative.

Refer to the Following Figure