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The market for marshmallows is given by:
Price (dollars per bag) 2 2.5 3 3.5 4 4.5
Quantity Demanded 150 140 130 120 110 100
Quantity Supplied 120 130 140 150 160 170
1. Draw the appropriate diagram for the marshmallow market.
2. Calculate the price elasticity of demand for marshmallows between the prices of $3.50 and $4.00. Is it elastic, inelastic, or neither?
3. Calculate the price elasticity of supply for marshmallows between the prices of $3.50 and $4.00. Is it elastic, inelastic, or neither?
4. At what price and quantity will total revenue be maximized?
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