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PED - short-answer

1.  Explain, using diagrams why he price elasticity of demand for commuter rail travel is inelastic but that for vacation rail travel is elastic. [10 Marks]

2. An exclusive pen manufacturer sells 4,000 pens per month at a price of 40 each. When the price is reduced to 30 sales increase to 6,000 pens per month.

(a) Calculate the price elasticity of demand for the pens over this price range.
(b) Is demand elastic, unit elastic or inelastic?
(c) Calculate the change in revenue due to the change in price.

3. The table below shows the demand schedule for a good. Complete the following table, using the appropriate equation, with the total expenditure and indicate in the elasticity column whether the good is elastic or inelastic over that price range.

Price () Demand (per week) Total expenditure Elasticity - elastic / inelastic?
1 50
2 40

3 30

4 25

5 20

6 16

7 13

8 10

9 8

10 5