Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

4. Elasticity

Total Revenue Along a Linear Demand Curve

Microeconomics

4. Elasticity

Total Revenue Along a Linear Demand Curve

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Multiple Choice

At what price is the elasticity of demand for the product equal to one?

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Verified step by step guidance

Identify the demand curve from the graph. The demand curve is a straight line, which can be represented by the equation P = a - bQ, where P is the price, Q is the quantity, a is the intercept on the price axis, and b is the slope of the demand curve.

Determine the intercepts of the demand curve. From the graph, the price intercept (where Q = 0) is P = 6, and the quantity intercept (where P = 0) is Q = 150.

Calculate the slope (b) of the demand curve. The slope is given by the change in price divided by the change in quantity, which is (6 - 0) / (0 - 150) = -6/150 = -1/25.

Write the equation of the demand curve using the intercept and slope: P = 6 - (1/25)Q.

To find the price at which the elasticity of demand is equal to one, use the formula for elasticity: E = (dQ/dP) * (P/Q). For a linear demand curve, elasticity is equal to one at the midpoint. Calculate the midpoint of the demand curve, which is the average of the intercepts: (6 + 0)/2 = 3. Therefore, the price at which elasticity is one is $3.