Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.
|
Price of crackers
|
Quantity Demanded (per month)
|
|
$3
|
80
|
|
$2.5
|
120
|
|
$2
|
160
|
|
$1.5
|
200
|
|
$1
|
240
|
$1.00 - $1.50:
$1.50 - $2.00:
$2.00 - $2.50:
$2.50 - $3.00:
If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.
Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following:
Profit maximizing output:
Approximate mark up over cost
In the long run, the price falls to $7.50. Why does this happen?
What is the new profit maximizing output?