Question 5 (2.25 points) A city economist is consulting with...

Question 5 (2.25 points) A city economist is consulting with the public utility companies to determine an optimal pricing plan. When the price of water usage falls by 1%, the quantity demanded rises by 0.44%. The absolute value of the price elasticity of demand for water usage is 1) 2.27 2) 44.0 3) 0.44 4) 1.00

The demand for bottled water in a small town is as follows: a. Is this a straight-line demand curve? How do you know? b. Calculate the price elasticity of demand for bottled water for a price rise from $\$ 1.00$ to $\$ 1.50 .$ Is demand elastic or inelastic for this price change? c. Calculate the price elasticity of demand for a price rise from $\$ 2.50$ to $\$ 3.00 .$ Is demand elastic or inelastic for this price change? d. According to the chapter, demand should become less and less elastic as we move downward and rightward along a straight-line demand curve. Use your answers in $b$. and $c$. to confirm this relationship. e. Create another column for total revenue on bottled water at each price. f. According to the chapter, a rise in price should increase total revenue on bottled water when demand is inelastic, and decrease total revenue when demand is elastic. Use your answers in $b$ and $c .,$ and the new total revenue column you created, to confirm this.

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