Question: Calculate the percentage change in revenue that would result from each of the actions in Exercise. Assume that the initial price in all cases is $100 per unit, and the initial quantity demanded is 1,000 units.
Exercise: Calculate the price elasticity of demand for the following cases:
a. When price rises by 5 percent, quantity demanded drops by 10 percent.
b. When price rises by 10 percent, quantity demanded drops by 2 percent.
c. When price rises by 0.05 percent, quantity demanded drops by 99 percent. (Which extreme case is this approaching? Note that the price rise is a fraction of 1 percent, not 5 percent.)
d. When price rises by 99 percent, quantity demanded drops by 0.05 percent. (Which extreme case is this approaching?)
e. When price falls by 10 percent, quantity demanded rises by 2 percent.