Name ____________________

11 ATAR Economics
Price Elasticity of Demand – Worksheet 2

1. For each of the following goods, state whether demand is likely to be elastic or inelastic and explain why, linking it
to one or more of the factors affecting price elasticity of demand.

Good Elastic/Inelastic Explanation

Food

Restaurant meals

Toothpaste

Cigarettes

Crayfish

Chocolate

Mars Bars

Diet Coke

Flights to Bali

Lamborghini

Electricity

Electricity (long-term
price increase)

Foxtel
2. The following schedules show the weekly male and female demand for Heather’s Hair Salon:

Price of Demand Demand Total Demand Total Revenue

haircut ($) (males) (females)
100 0 50
80 10 70
60 20 95
40 35 115
20 75 140

a. Complete the total demand and total revenue columns.

b. At what price is total revenue maximised?

c. Calculate the price elasticity of demand for both males and females using the midpoint formula.

Price Range ($) PED Males PED Females

80 - 100

60 – 80

40 – 60

20 – 40

d. Complete the following table by calculating total revenue for male and female demand.

Price ($) Total Revenue - Males Total Revenue - Females

100

80

60

40

20
e. At what price is total revenue maximised for male customers?

f. At what price is total revenue maximised for female customers?

g. Explain the link between price elasticity and total revenue.

h. Should the firm charge the same price for both males and females or should they use price discrimination? Why?

i. If a firm wants to increase its revenue, should it charge the lower price to the group with the most elastic or
inelastic demand? Why?

j. Explain why females will generally have a lower elasticity coefficient for haircuts than men.