Multiple Choice
At what price is the elasticity of demand for the product equal to one?
4. Elasticity
Total Revenue Along a Linear Demand Curve
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At what price is revenue maximized? 
A
$2
B
$3
C
$4
D
$5
Verified step by step guidance1
Identify the demand curve from the graph, which shows the relationship between price (P) and quantity (Q). The curve is linear and downward sloping.
Understand that total revenue (TR) is calculated as the product of price (P) and quantity (Q), i.e., TR = P * Q.
To find the price at which revenue is maximized, recognize that revenue is maximized at the midpoint of the linear demand curve. This is because the demand curve is linear, and the midpoint represents the point where the elasticity of demand is unitary (elasticity = 1).
Locate the midpoint of the demand curve on the graph. The demand curve starts at a price of $6 and a quantity of 0, and ends at a price of $0 and a quantity of 150. The midpoint is at a price of $3 and a quantity of 75.
Conclude that the price at which revenue is maximized is $3, as this is the price corresponding to the midpoint of the demand curve.
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