Marginal revenue and elasticity. (10 points) GLS Ch9 P5. In Cleveland, Clive sells 15 cloves at a...

Question

Marginal revenue and elasticity. (10 points) GLS Ch9 P5. In Cleveland, Clive sells 15 cloves at a price of $5 each. If Clive lowers his price by 10%, to $4.50 per clove, he will sell 16, or 6.66% more. In Dallas, Della sells 15 cloves for $5 each. If Della lowers her price by 2%, to $4.90, she will sell 16 cloves, or 6.66% more. (a) (3 points) Classify the demand curves that Clive and Della face as elastic or inelastic. (b) (3 points) Determine the marginal revenue of the 16th unit for Clive. Then, compute the marginal revenue of the 16th unit for Della. (c) (4 points) How does the marginal revenue received by a seller depend on the price elasticity of demand? Explain your answer.

David · Accepted Answer

1 
 
Introduction 
Elasticity is the responsiveness of change in quantity demand of a good due to changes in its 
price. When there is percentage change in price of a good, there will be change in the quantity 
demanded of the good with different per cent rates. Elasticity is calculated by dividing 
percentage change in quantity demand with the percentage change in price.
a. In the given case of Clive market, the price elasticity of demand is calculated by dividing 
6.66% or 0.067 by 0.10. Hence,      
     
    
        
Since the price elasticity calculated for Clive is less than 1, therefore its demand is less elastic. It 
means that 1% change in price of Clive leads to 0.

Marginal revenue and elasticity. (10 points) GLS Ch9 P5. In Cleveland, Clive sells 15 cloves at a price of $5 each. If Clive lowers his price by 10%, to $4.50 per clove, he will sell 16, or 6.66%...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment