A good's price elasticity of demand is a measure of how sensitive the quantity demanded is to its price. (Sabatelli, Lorenzo 2016). As we have learned how consumers demand changes when prices changes, or how they respond to the changes in prices of goods and services. Even thou, the law of demand states that, as prices go up, the demand of goods and services go down, and as price comes down, the demand of goods and services goes up as well. both are in opposite direction. The major consideration here is how much is the changes in demand and to what magnitude is this demand and supply. That's what the elasticity of demand turns to answer.
QUESTION ONE.
The price elasticity of demand is
Change in quantity demanded/change in price.
Therefore,
Change in quantity demanded = 450 -- 400 = 50 meals.
Change in price = $18 - $ 20 = $2
Price elasticity of demand = 50 / 2 = 25
QUESTION TWO.
The total revenue will fall as a result of the change in prices. The reason being that, even thou, the reduction in price increased the quantity demanded, but the revenue is low using these two prices to compute. If you multiply $20 by 450, you should get $9000. But when you multiply $18 by 450, you will get $8100. Looking at these simple calculations, you will realize that, the revenue has fallen.
QUESTION THREE.
The price elasticity of demand is
Change in quantity demanded/change in price.
Therefore,
Change in quantity demanded = 500 - 450 = 50 meals
Change in price = $16 - $ 18 = $2
Price elasticity of demand = 50 / 2 = 25
QUESTION FOUR.
In the same sense, total revenue will go down as a result of the reduction in price again. Even thou, consumers responded to the price reduction, it also cost the company some part of its revenue.
QUESTION FIVE.
Total revenue for all the different prices.
Total revenue = total quantity x price per unit.
Total revenue at $20 at 400 = $ 20 x 400 meals = $ 8000.
Total revenue at $ 18 at 450 meals = $ 18 x 450 meals = $ 8100
Total revenue at $ 16 at 500 meals = $ 16 x 500 meals - $ 8000
My predictions in the previous questions are accurate and it's in alignment with the calculations here.
REVENUE
Sabatelli, Lorenzo (2016). Relationship between the Uncompensated Price Elasticity and the Income Elasticity of Demand under Conditions of Additive Preferences.
Lehner, S. Peer, S. (2019), The price elasticity of parking.
Davis, A. Nichols, M. (2013), The Price Elasticity of Marijuana Demand