(a) Plot the demand curve for good Z to show it is linear. (b) (i) Calculate price elasticity of demand (PED) for an increase in price from £5 to £10. Is demand elastic or inelastic? (ii) Calculate price elasticity of demand (PED) for an increase in price from £20 to £25. Is demand elastic or inelastic? (iii) Using your results of parts (i) and (ii), explain what happens to PED along a straight-line demand curve. (c) Explain, using diagrams, the relationship between price elasticity of demand and profits,

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Chapter3: Demand Analysis
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The following is a demand schedule for good Z.
Price per unit (£)
10
15
20
25
30
Q demanded per week
30
25
15
10
(a) Plot the demand curve for good Z to show it is linear.
(b)
(i) Calculate price elasticity of demand (PED) for an increase in price from £5 to £10. Is
demand elastic or inelastic?
(ii) Calculate price elasticity of demand (PED) for an increase in price from £20 to £25. Is
demand elastic or inelastic?
(iii) Using your results of parts (i) and (ii), explain what happens to PED along a straight-line
demand curve.
(c) Explain, using diagrams, the relationship between price elasticity of demand and profits.
E Please select file(s)
Select file(s)
20
Transcribed Image Text:The following is a demand schedule for good Z. Price per unit (£) 10 15 20 25 30 Q demanded per week 30 25 15 10 (a) Plot the demand curve for good Z to show it is linear. (b) (i) Calculate price elasticity of demand (PED) for an increase in price from £5 to £10. Is demand elastic or inelastic? (ii) Calculate price elasticity of demand (PED) for an increase in price from £20 to £25. Is demand elastic or inelastic? (iii) Using your results of parts (i) and (ii), explain what happens to PED along a straight-line demand curve. (c) Explain, using diagrams, the relationship between price elasticity of demand and profits. E Please select file(s) Select file(s) 20
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