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A Continuous Linear Demand Curve and Point Elasticity

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Consider the following hypothetical demand schedule for “Tammy Fay” brand Mascara:

Qd  = 600 – 16⅔ × P

 Where Qd represents quantity demanded in pounds and P is the price in dollars.

 (a) Based on this demand schedule, set up a graph (using excel) of the demand curve and the corresponding total revenue curve (with quantity on the horizontal axis).

 (b) Calculate the price elasticity (using the point elasticity formula) of demand at quantities demanded of 500, 400, 300, 200 and 100.

FYI: Here is an excel sheet that deals with the issues of this assignment

Sheet1

Qd=500-2PIf Q=0 then P=250
2P=500-Qd
P=250-0.5QdIf P=0 then Q=500
QPTR=PxQ
50000
4502511250
4005020000
3507526250
30010030000
25012531250
20015030000
15017526250
10020020000
5022511250
02500
QPElasticity
50000.00
450250.11
400500.25
350750.43
3001000.67
2501251.00
2001501.50
1501752.33
1002004.00
502259.00
0250
E=|%ΔQ/%ΔP|
E=|(ΔQ/Q)/(ΔP/P)|
E=-(ΔQ/ΔP)(P/Q)
(ΔQ/ΔP)=-2
E=-(-2)(P/Q)

Demand 500 0 0 250 -300,100 300 300 0 0 100 100 100 100 0 0 200 200

P 500 450 400 350 300 250 200 150 100 50 0 0 25 50 75 100 125 150 175 200 225 250

Total Revenue 500 450 400 350 300 250 200 150 100 50 0 0 11250 20000 26250 30000 31250 30000 26250 20000 11250 0

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