The following is a demand schedule for Good ABC. Price per unit ($) 5 10 15 20 25 30
Quantity demanded per week 30 25 20 15 10 5
(i) Plot the demand curve for Good ABC to show that it is linear. (ii) Using the average method, calculate the price elasticity of demand (PED) for an increase in price from $5 to $10. (iii) Using the average method, calculate the price elasticity of demand (PED) for an increase in price from $20 to $25. (iv) Using your results of parts (ii) and (iii), explain what happens to PED along a straight-line demand curve. (v) Calculate the percentage change in quantity demanded that will result from an increase in price of 10% when PED=2. Noting if quantity increases or decreases. (vi) Calculate total revenue changes for the part (ii) and (iii).