Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.
104) Explain why the price elasticity of demand varies along a demand curve, even if the demand curve is linear.
105) Summarize the relationship between elasticity, price changes, and changes in total revenue.
106) Illustrate graphically the effect the credit market crisis in the United States in 2008 had in the market for existing single-family homes. Assuming the demand for existing single-family homes is relatively inelastic, what is likely to happen to the total revenues of home sellers as a result of the credit market crisis?
107) Assume that, over time, engineers develop new residential furnaces that can run on different types of fuels, e.g., natural gas, electricity, propane, and fuel oil, simply by flipping a switch on the furnace. How would this technological change affect the price elasticity of demand for natural gas? Why?
108) Assume that, for a particular demand curve, when price rises from $50 to $60, total revenue falls from $8,750 to $7800.
a. Based on this information, what is the quantity demanded at each price.
b. Without calculating the coefficient of elasticity, is demand over this range elastic or inelastic? How do you know?
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