1. The graph below illustrates the inverse demand functions (demand curves) D1 and D2 for which the demand functions are: Q₁ = 120.5P₁ (D1) and Q2 = 30-5P₂ (D2). P 24 20 16 12 8 6 4 2 D1 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 a) Given the current price for P= $4, compute the point elasticity of demand for D1 and D2 and state if each demand is elastic, unit elastic, or inelastic at this price? b) Given your computations in part a, how much would the quantity demanded change (as a percent) for each demand curve if the prices increased by 20%? c) If the current price is $4 per unit in both markets, and the firm wants to maximize revenue, what price should they be charging in each market? (Motivate)

1. The graph below illustrates the inverse demand functions (demand curves) D1 and D2 for which the demand functions are: Q₁ = 120.5P₁ (D1) and Q2 = 30-5P₂ (D2). P 24 20 16 12 8 6 4 2 D1 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 a) Given the current price for P= $4, compute the point elasticity of demand for D1 and D2 and state if each demand is elastic, unit elastic, or inelastic at this price? b) Given your computations in part a, how much would the quantity demanded change (as a percent) for each demand curve if the prices increased by 20%? c) If the current price is $4 per unit in both markets, and the firm wants to maximize revenue, what price should they be charging in each market? (Motivate)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

I need help working through this problem
The following table shows two demand schedules for a given style of men's shoe-that is, how many pairs per month will be demanded at various prices at Stromnord, a men's clothing store. $ Price $75 70 65 60 55 $ D1 Quantity Demanded 53 60 68 77 87 Suppose that Stromnord has exactly 65 pairs of this style of shoe in inventory at the start of the month of July and will not receive any more pairs of this style until at least August 1. Instructions: Enter your answers as a whole number. a. If demand is D₁, what is the lowest price that Stromnord can charge so that it will not run out of this model of shoe in the month of July? What if demand is D2? D2 Quantity Demanded 13. 15 18 22 27 b. If the price of shoes is set at $75 for both July and August and demand will be D2 in July and D₁ in August, how many pairs of shoes should Stromnord order if it wants to end the month of August with exactly zero pairs of shoes in its inventory? pair(s) How many pairs of shoes should it order if the price…
Suppose the demand function for smart phones is given by Q(P) = AP¹-a 1-a where A> 0 and a > 1. Use calculus to show that the price elasticity is equal to 1 — a everywhere along the whole curve. (Hint: Recall that if f(x) = x³, then ƒ'(x) = ßxß-¹). Interpret this result.
Please answer 1 and 2
Gr8 Ideaz Inc. has determined that the demand function for their heated socks is given by: 5 7P². a. Find E(p), the Elasticity of Demand as a function of price, p. E(p) = b. Find the Elasticity of Demand when heated socks are selling at a price of $10. Give result accurate to at least 3 decimal places. E(10) = c. At this price ($10): We would say the demand for heated socks is: Select an answer Based on this, in order to increase revenue we should: Select an answer d. Use the Elasticity model to determine the price that maximizes revenue. (Round result to 2 decimal places.) D(p) = = 345- p=
The demand for hamburgers is given by Qd=10-p and the supply is Qs=4p-10, where pd and ps are, respectively the price paid by demanders and the price received by suppliers. A: Draw the demand and supply functions. What is the price-elasticity of demand? What is the price-elasticity of supply? B: Find the equilibrium quantity and price, and show them on the graph. C: Suppose due to the rising health awareness the demand decreases to Q d=5-p. Find the new equilibrium prices and quantity, and show them on the graph. D: Suppose that the demand and supply are as before, i.e. Qd=10-p and Qs=4p-10, but now the government imposes a quantity tax on the suppler at the rate of 1 per unit of the quantity. What quantity will be sold and what price? E: In part d), what is the total amount of tax collected by the government? How this tax amount is divided between the demanders and supplier? Who pays more and why? Explain
2. [Own Price Elasticity of Demand] Given a demand function Q=f(P), the own price elasticity of demand is defined as P - (de). (2). ε = What is the own price elasticity of demand e (a) for the linear demand function Q = 200-3.5P when P = 10. (b) for the linear inverse demand function P= 100-3.5Q when Q = 10. (c) for the inverse demand function P=Q-35, when (i) Q = 5; (ii) Q = 10.
3) When is demand said to be inelastic? a) when the quantity demanded changes proportionately more than price b) when the quantity demanded changes proportionately more than income c) when the quantity demanded changes proportionately less than price d) when the quantity demanded changes proportionately less than income 4) Suppose there is a 3 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. What is the price elasticity of demand for X? a) 0 b) 2 c) 6 d) infinite