Question

# With such a demand schedule you could calculate four elasticities of demand for the intervals between...

With such a demand schedule you could calculate four elasticities of demand for the intervals between price 5 and 4, 4 and 3, 3 and 2, as well as 2 and 1. Calculate all four showing all work.

Also, imagine a market demand with a schedule of prices from 1-5 associated with quantities demanded from 5-1, thus a price of 5 is coordinated with a quantity of 1 all the way down to a price of 1 associated with a quantity of 5. What would the slope of this line be and would that be appropriate for a demand curve (explain why)?

Given the information the demand schedule is given below.

So, here as the “P” decreases from “5” to “4” the quantity demand increases to “2” from “1”, => dQ/dP = (1/-1) = (-1), => the elasticity is given by, => e=(dQ/dP)*(P/Q) = (-1)*(4/2) = (-2).

So, the above table shows the elasticity for the “4 possible” prices.

Now, given the information the slope of the demand curve is given by “dP/dQ=(-1)”.

=> the equation of the demand curve is given by.

=> P=A-Q, => one point on the demand curve is given by “P=5, Q=1”.

=> P=A-Q, => 5=A-1, => A=6, => the equation of the demand curve is given by, => P=6-Q. So, the demand curve is the negatively sloped linear demand curve in appropriate form.

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