Question

3. The quantities of Uber rides that Portland residents are willing to buy is represented by the following demand schedule:

Demand for Uber rides

Price	$1.00	$2.00	$3.00	$4.00	$5.00	$6.00	$7.00	$8.00
Quantity demanded (per day)	100	90	80	70	60	50	40	30

1. Use the total revenue test to determine whether demand is elastic, inelastic or unitary elastic between each of the prices (i.e. use the change in TR to find E_d) Show your work. Explain in two sentences or less why changes in total revenue reveal the elasticity of demand.

2. Use the arc elasticity formula (i.e. the formula used in class to calculate percentage changes) to calculate the elasticity of demand between each of the prices. Show your work.

3. Draw the demand curve for Uber rides. As prices change, what happens to the slope of the demand curve? What happens to the elasticity of demand? Indicate on your graph where demand is elastic, inelastic and unitary elastic.

Answer 1

Table 1

P	Q	TR	ed
1	100	100	0
2	90	180	-0.11111
3	80	240	-0.25
4	70	280	-0.42857
5	60	300	-0.66667
6	50	300	-1
7	40	280	-1.5
8	30	240	-2.33333

Table 2

P	Q	ed
1	100
2	90	-0.15789
3	80	-0.29412
4	70	-0.46667
5	60	-0.69231
6	50	-1
7	40	-1.44444
8	30	-2.14286

Figure 1