Question

Question 2

Consider the demand schedule for the product produced by a monopolist in Table 2.

Table 2:

Quantity Demanded	Price (RM)	Total Revenue	Marginal Revenue
1	325
2	300
3	275
4	250
5	225
6	200
7	175
8	150
9	125
10	100
11	75
12	50
13	25
14	0

a) Complete the table.

                                                                                                                              [14 marks]

b) What do the data in the table indicate about the relationship between total revenue and

    marginal revenue?                                      

                                                                                                                                [3 marks]

c) What do the data in the table indicate about the elasticity of demand?

                                                                                                                                [3 marks]

                                                                                                                  [Total marks: 40]

Answer 1

b.

From the calculation of total revenue and marginal revenue it can be clearly seen that upto quantity=8, total revenue is increasing and marginal revenue is decreasing

But after quantity=8, the total revenue starts decreasing and marginal revenue starts giving value negative values

C.

If price and revenue moves in the same direction which means if price increases and revenue increases then the demand is inelastic in nature

When price and total revenue moves in opposite direction it means the demand is elastic in nature

Here upto quantity= 8 the demand is elastic in nature because price is decreasing and and total revenue is increasing but after quantity = 8, price is decreasing and total revenue is also decreasing so the demand is inelastic