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AP Microeconomics 2.3 Price Elasticity of Demand Questions

Practise measuring demand responsiveness, interpreting elasticity across price ranges, and linking a firm's price decision to quantity, revenue, and marginal revenue.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • calculate price elasticity or an implied quantity response from percentage price and quantity changes
  • classify and compare elastic, inelastic, unit and perfect cases from coefficients, schedules or graphs
  • use elasticity and marginal-revenue signs to predict how a price change affects total revenue
  • explain responsiveness with substitutes, budget importance, necessity and time to adjust

Covered syllabus points

MKT-3.E—a. Define measures of elasticity. b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given…

Question 1

[Maximum number: 1]

Arzeye Pharma has a patent, a legal barrier to entry, on its newly developed eye treatment that cures common eye problems. Arzeye Pharma is currently earning positive economic profit and is producing the profit-maximizing quantity of eye treatments.

Suppose Arzeye Pharma wants to charge a price that maximizes its total revenue rather than its profit.

At quantity QR\mathrm{Q}_{\mathrm{R}} identified in part (b)(i), is the demand for eye treatments elastic, inelastic, or unit elastic?

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