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"The demand for scooters is:  Q = 6000 – 40P + 0.05Y Where Q is number of...

"The demand for scooters is:  Q = 6000 – 40P + 0.05Y

Where Q is number of scooters, P is the Price, and Y is income."

a) Calculate the price elasticity of demand (arc elasticity) from P = $110 to P = $120, when Y = $50,000.

Enter as a value (ROUND TO TWO DECIMAL PLACES. ANSWER SHOULD BE A POSITIVE NUMBER.).

b) What happened to Total Revenue when P increased from $110 to $120?

c) Given your answers in part a and b, would you expect the price that maximizes Total Revenue to be:

1. less than $110

2. Equal to $110

3. Greater than $110

d) When Y = $50,000, what Price maximizes Total Revenue?

e) Suppose there is a shortage of bicycles at stores. How would this affect the elasticity of demand for scooters?

1. Increase

2. Decrease

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