Mark is selling gourmet apples at a price of $2
per pound. Currently, he sells 100
pounds of apples per week. This week, Mark raises his price to $3
,
and his sales of apples fall to 75
lbs.
Mark's initial revenue from apple sales was $enter your response here
.
Mark's new revenue from apple sales is $enter your response here
.
Part 2
Since Mark's revenue increased when the price of apples rose, the demand for Mark's gourmet apples must be
▼
a. elastic
b. unitary
c. inelastic
.
To calculate Mark's initial revenue from apple sales, we multiply the price ($2) by the quantity (100 pounds):
Initial revenue = $2 * 100 pounds = $200.
To calculate Mark's new revenue from apple sales, we multiply the new price ($3) by the new quantity (75 pounds):
New revenue = $3 * 75 pounds = $225.
Now, to determine the elasticity of demand, we compare the percentage change in quantity demanded to the percentage change in price.
Percentage change in quantity demanded = (new quantity - initial quantity) / initial quantity * 100% = (75 - 100) / 100 * 100% = -25%.
Percentage change in price = (new price - initial price) / initial price * 100% = (3 - 2) / 2 * 100% = 50%.
Since the percentage change in quantity demanded (-25%) is less than the percentage change in price (50%), the demand for Mark's gourmet apples is inelastic. Therefore, the answer is c. inelastic.
To calculate Mark's initial revenue, we need to multiply the price per pound ($2) by the number of pounds sold (100).
Initial revenue = $2/pound * 100 pounds = $200
To calculate Mark's new revenue, we need to multiply the new price per pound ($3) by the new number of pounds sold (75).
New revenue = $3/pound * 75 pounds = $225
Therefore, Mark's initial revenue from apple sales was $200, and his new revenue from apple sales is $225.
Now, to determine the elasticity of demand for Mark's gourmet apples, we need to compare the change in price to the change in quantity demanded.
The price increased by $1 (from $2 to $3), and the quantity demanded decreased by 25 pounds (from 100 pounds to 75 pounds).
Elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case:
Percentage change in quantity demanded = (New quantity - Initial quantity) / Initial quantity * 100
= (75 - 100) / 100 * 100
= -25%
Percentage change in price = (New price - Initial price) / Initial price * 100
= (3 - 2) / 2 * 100
= 50%
Elasticity of demand = (-25% / 50%) = -0.5
Since the elasticity of demand is less than 1, which is in absolute value, we can conclude that the demand for Mark's gourmet apples is inelastic (c).
To calculate Mark's initial revenue from apple sales, we can use the formula:
Initial revenue = Price per pound * Quantity sold
Initial revenue = $2 * 100 lbs = $200
To calculate Mark's new revenue from apple sales, we can use the same formula with the updated price and quantity:
New revenue = Price per pound * Quantity sold
New revenue = $3 * 75 lbs = $225
Therefore, Mark's initial revenue from apple sales was $200 and his new revenue is $225.
Part 2:
Since Mark's revenue increased when the price of apples rose, the demand for Mark's gourmet apples must be inelastic.