The following graph shows the daily demand curve for bippitybops in Houston.
Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve.
Note: You will not be graded on any changes made to this graph.
Total Revenue
0
6
12
18
24
30
36
42
48
54
60
66
72
180
165
150
135
120
105
90
75
60
45
30
15
0
PRICE (Dollars per bippitybop)
QUANTITY (Bippitybops)
Demand
A
B
On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bippitybop.
Total Revenue
0
15
30
45
60
75
90
105
120
135
150
165
180
2560
2400
2240
2080
1920
1760
1600
1440
1280
1120
TOTAL REVENUE (Dollars)
PRICE (Dollars per bippitybop)
According to the midpoint method, the price elasticity of demand between points A and B on the initial graph is approximately    .
Suppose the price of bippitybops is currently $15 per bippitybop, shown as point B on the initial graph. Because the price elasticity of demand between points A and B is    , a $15-per-bippitybop increase in price will lead to    in total revenue per day.
In general, in order for a price decrease to cause a decrease in total revenue, demand must be    .

Let's break down each part of the question to understand the key concepts and what is being asked for.

### Step 1: Calculate Total Revenue at Various Prices on the Initial Graph

The demand curve shows the relationship between the price of bippitybops and the quantity demanded. **Total Revenue (TR)** is calculated using:

\[
TR = \text{Price} \times \text{Quantity}
\]

For each price point along the demand curve, calculate the total revenue. Let's assume the table contains price points such as $30, $45, $60, $75, etc. You can place a green point on the graph for each calculation based on the data provided.

### Step 2: Plot Annual Total Revenue

Once you've calculated the total revenue at each price point, plot those points on the second graph. You can see the general behavior of the total revenue curve—whether it is increasing, decreasing, or reaching a maximum value.

### Step 3: Midpoint Method to Calculate Price Elasticity of Demand (Between Points A and B)

The **price elasticity of demand (PED)** between two points measures how sensitive the quantity demanded is to a change in price. Using the midpoint formula:

\[
PED = \frac{ \frac{\Delta Q}{\left(Q_1 + Q_2\right)/2} }{ \frac{\Delta P}{\left(P_1 + P_2\right)/2} }
\]

Where:
- $ \Delta Q $ is the change in quantity demanded,
- $ Q_1 $ and $ Q_2 $ are the initial and final quantities,
- $ \Delta P $ is the change in price,
- $ P_1 $ and $ P_2 $ are the initial and final prices.

You can plug in the values for points A and B from the initial demand curve to calculate the price elasticity of demand.

### Step 4: Effect of a $15 Price Increase on Total Revenue

Once you have the price elasticity of demand, you can determine the effect of a $15-per-bippitybop increase on total revenue. If the demand is **elastic (PED > 1)**, a price increase will decrease total revenue. If the demand is **inelastic (PED < 1)**, a price increase will increase total revenue.

### Step 5: Conditions for Price Decreases Leading to Revenue Decreases

If a price decrease leads to a decrease in total revenue, the demand must be **inelastic**. This means that the percentage change in quantity demanded is smaller than the percentage change in price.

### Summary

- **Total revenue** is calculated as price multiplied by quantity.
- The **price elasticity of demand** (PED) determines how sensitive the quantity demanded is to price changes.
- If demand is **elastic**, a price increase will lead to lower total revenue.
- If demand is **inelastic**, a price increase will increase total revenue.
  
Do you need further details on any of these points? Here are some related questions:

1. How do you interpret the shape of the total revenue curve?
2. What is the relationship between elasticity and total revenue at different points on the demand curve?
3. Can price elasticity of demand change at different price ranges?
4. How does unitary elasticity (PED = 1) affect total revenue?
5. What other factors, apart from price, can influence the demand for bippitybops?

**Tip**: Elasticity can be different at various price levels—elastic at one point and inelastic at another. Analyze carefully.

The following graph shows the daily demand curve for bippitybops in Houston. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. Total Revenue 0 6 12 18 24 30 36 42 48 54 60 66 72 180 165 150 135 120 105 90 75 60 45 30 15 0 PRICE (Dollars per bippitybop) QUANTITY (Bippitybops) Demand A B On the following graph, use the green point (triangle symbol) to plot the annual total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per bippitybop. Total Revenue 0 15 30 45 60 75 90 105 120 135 150 165 180 2560 2400 2240 2080 1920 1760 1600 1440 1280 1120 TOTAL REVENUE (Dollars) PRICE (Dollars per bippitybop) According to the midpoint method, the price elasticity of demand between points A and B on the initial graph is approximately . Suppose the price of bippitybops is currently $15 per bippitybop, shown as point B on the initial graph. Because the price elasticity of demand between points A and B is , a $15-per-bippitybop increase in price will lead to in total revenue per day. In general, in order for a price decrease to cause a decrease in total revenue, demand must be .

Learn how to calculate total revenue at various prices and how to use the midpoint method to determine the price elasticity of demand. This problem explains how a price increase affects total revenue and explores the relationship between elasticity and revenue changes.

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