A Economics
The implications of PED for total revenue
The demand for chocolate
The price falls from 40p to 36p
The demand rises from 20 to 40 bars
Questions
1 Calculate the PED when the price goes down from 40p to 36p.
2 Is this price elastic or price inelastic?_________________________________________
3 Calculate the total revenue earned when the price was 40p (remember: revenue =
price x quantity).
4 Calculate the total revenue earned at the new price of 36p.
5 What has happened to the total revenue as the price has fallen?___________________
___________________________________________________________________________
EXTENSION
6 What can you conclude about the link between total revenue and elastic PED?_______
___________________________________________________________________________
A Economics
7
Now think about the market for petrol. Suppose the price falls from 100p a litre to
80p a litre, and quantity demanded increases from 40 litres per household per week
to 42 litres per household per week. Calculate the PED.
8
What was the total revenue at a price of 100p? What about the total revenue at the
new price of 80p?
9 What has happened to the total revenue as the price has fallen?___________________
___________________________________________________________________________
EXTENSION
10 What can you conclude about the link between total revenue and inelastic PED?____
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________