40) If demand is inelastic, then price and total revenue are directly related.

41) If demand is elastic, then when price rises, total revenue will decrease.

42) A bumper crop of wheat could be bad news to farmers if the price elasticity of demand for wheat is greater than one.

Recall the Application about the price of vanity license plates in Virginia to answer the following question(s).

43) Recall the application. In 1987, the price elasticity of demand for vanity plates in Ohio was 2.60. If the state’s objective was to maximize its revenue from vanity plates, it should increase its price.

44) How do you calculate a percentage change in quantity if given an elasticity of demand and a percentage change in price?

45) If demand elasticity of airline tickets is 3, what percentage change in quantity would the airlines expect from a 10% increase in price?

46) What is total revenue for a firm?

47) Suppose that you’re the manager of a firm. You notice that when you raised your price from $10 to $11, sales fell from 500 to 400. Should you raise your price more?

48) What is the relationship between price elasticity of demand and total revenue for the firm?

4.3 Elasticity and Total Revenue for a Linear Demand Curve

1) Which of the following characteristics are of a linear demand curve?

A) It has a constant slope.

B) It has a constant elasticity of demand.

C) The upper half of the liner demand curve is inelastic.

D) all of the above