Bob's demand curve for movies is given Q = 10 - 2P
a) What is the price elasticity of demand at a price of 2? Is Bob's demand elastic or inelastic at a price of 2?
b) Assume that the price is 3. What is Bob's total expenditure on movies? What is the consumer surplus?
c) What is the price that maximizes Bob's total expenditure on movies? what is the price elasticity of demand at this price?
d) If the price increases from 1 to 2, does Bob's total expenditure on movies rise or fall? If the price rises from 3 to 4, does Bob's total expenditure on movies rise or fall?