AP Microeconomics Mkt 3 E a Define Measures of Elasticity B Explain Using Graphs Where Appropriate Measures of Elasticity and the Impact of a Given Questions

Practise calculating and classifying price elasticity of demand, comparing responsiveness across a curve, and predicting quantity, revenue, and spending effects.

Exam points

calculate price elasticity as percentage change in quantity demanded divided by percentage change in price
use a given elasticity and price change to calculate the direction and percentage change in quantity demanded
classify elastic, inelastic, unit-elastic and perfect cases from coefficients, tables or graphs
apply the price-total-revenue test and connect elastic or inelastic regions to the sign of marginal revenue
compare elasticity using substitutes, budget share, necessity and the time available for consumers to adjust

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

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AP Microeconomics Mkt 3 E a Define Measures of Elasticity B Explain Using Graphs Where Appropriate Measures of Elasticity and the Impact of a Given Questions question 1