Use the Following Data for a Demand Curve $\times$ Quantity Maximized? What Is the Elasticity at That Point

question 58

Essay

Use the following data for a demand curve.
(A)Use the midpoint formula to calculate the elasticity between a price of $14 and $15.
(B)Use the midpoint formula to calculate the elasticity between $7 and $8.
(C)Because this is a linear demand curve, why does the elasticity change?
(D)At what point is price $\times$ quantity maximized? What is the elasticity at that point?

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Definitions:

Precautionary Motive

The desire to hold liquid assets as a safeguard against unforeseen emergencies or as a precaution against future financial uncertainties.

Speculative Motive

The intent to hold cash or assets in anticipation of future price changes to make a profit.

Money Supply

The aggregate money supply in an economy at a particular time, covering cash, coins, and deposits in checking and savings accounts.

Demand Deposits

Bank accounts from which deposited funds can be withdrawn at any time without any advance notice to the bank.