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d) What happens to total sales revenue for pens as the price for pens changes from $2 to $4? e) Calculate the cross-price elasticity of demand for pens when the price of pens is $2, and the price of refillable pencils increases from $2 to $4 (use the arc elasticity formula). Note, when the price of refillable pencils increases from $2 to $4, the quantity demanded of pens (at price $2) increases from 100 to 120.

d) What happens to total sales revenue for pens as the price for pens changes from $2 to $4? e) Calculate the cross-price elasticity of demand for pens when the price of pens is $2, and the price of refillable pencils increases from $2 to $4 (use the arc elasticity formula). Note, when the price of refillable pencils increases from $2 to $4, the quantity demanded of pens (at price $2) increases from 100 to 120.

Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter18: Pricing The Factors Of Production
Section: Chapter Questions
Problem 4TY
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Note :Please Solve  d,and e .

*1. The figure below shows the demand for pens. The demand curve Do describes the demand for pens when the price of refillable pencils is $2. The line D: describes the demand for pensif the price of refillable pencils were to rise to $4. De and D; are straight lines and the drawing is made to scale so, for instance, when P=10 then Q=20,when P-8 then Q = 40 and so on. 16-Price 144 124 10 D₂ D₁ 80 100 120 140 Pens per day Parts a)-d) refer to changes in the price of pens, holding the price of pencils constant at $2. a) Calculate the midpoint (arc) elasticity of demand for a rise in the price of pens from $2 to 54. b) Calculate the gradient (or slope) of the demand curve for pens. The gradient is constantalong a straight line and therefore also equal to the derivative of P with respect to Q (dP/dQ). Now you can calculate dQ/dP in order to solve part c. c) Calculate the point elasticity of demand both at a price of $2 and at a price of $4. d) What happens to total sales revenue for pens as the price for pens changes from $2 to $4? e) Calculate the cross-price elasticity of demand for pens when the price of pens is $2, and the price of refillable pencils increases from $2 to $4 (use the arc elasticity formula). Note, when the price of refillable pencils increases from $2 to $4, the quantity demanded of pens (at price $2) increases from 100 to 120.
Transcribed Image Text:*1. The figure below shows the demand for pens. The demand curve Do describes the demand for pens when the price of refillable pencils is $2. The line D: describes the demand for pensif the price of refillable pencils were to rise to $4. De and D; are straight lines and the drawing is made to scale so, for instance, when P=10 then Q=20,when P-8 then Q = 40 and so on. 16-Price 144 124 10 D₂ D₁ 80 100 120 140 Pens per day Parts a)-d) refer to changes in the price of pens, holding the price of pencils constant at $2. a) Calculate the midpoint (arc) elasticity of demand for a rise in the price of pens from $2 to 54. b) Calculate the gradient (or slope) of the demand curve for pens. The gradient is constantalong a straight line and therefore also equal to the derivative of P with respect to Q (dP/dQ). Now you can calculate dQ/dP in order to solve part c. c) Calculate the point elasticity of demand both at a price of $2 and at a price of $4. d) What happens to total sales revenue for pens as the price for pens changes from $2 to $4? e) Calculate the cross-price elasticity of demand for pens when the price of pens is $2, and the price of refillable pencils increases from $2 to $4 (use the arc elasticity formula). Note, when the price of refillable pencils increases from $2 to $4, the quantity demanded of pens (at price $2) increases from 100 to 120.
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