The document discusses the relationships between price, quantity demanded, total revenue, elasticity, and marginal revenue for a linear demand curve. It contains graphs showing how price and total revenue change as quantity increases. It also illustrates the different types of elasticity that can occur at different points along the demand curve, such as inelastic, elastic, and unit elastic. Finally, it notes that the slope of the marginal revenue curve can indicate the elasticity of demand.

1. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
0 010 20 30 40 50
3-1

2. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
0 10 20 30 40 50
80
800
0 10 20 30 40 50
3-2

3. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
80
800
60 1200
0 10 20 30 40 500 10 20 30 40 50
3-3

4. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
80
800
60 1200
40
0 10 20 30 40 500 10 20 30 40 50
3-4

5. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
80
800
60 1200
40
20
0 10 20 30 40 500 10 20 30 40 50
3-5

6. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
80
800
60 1200
40
20
Elastic
Elastic
0 10 20 30 40 500 10 20 30 40 50
3-6

7. Elasticity, Total Revenue and Linear Demand
QQ
P
TR
100
80
800
60 1200
40
20
Inelastic
Elastic
Elastic Inelastic
0 10 20 30 40 500 10 20 30 40 50
3-7

8. Elasticity, Total Revenue and Linear Demand
QQ
P TR
100
80
800
60 1200
40
20
Inelastic
Elastic
Elastic Inelastic
0 10 20 30 40 500 10 20 30 40 50
Unit elastic
Unit elastic
3-8

9. Demand, Marginal Revenue (MR) and
Elasticity
• For a linear inverse
demand function,
MR(Q) = a + 2bQ,
where b < 0.
• When
– MR > 0, demand is
elastic;
– MR = 0, demand is unit
elastic;
– MR < 0, demand is
inelastic.
Q
P
100
80
60
40
20
Inelastic
Elastic
0 10 20 40 50
Unit elastic
MR
3-9