You start a business making decorative reusable water bottles.Suppose the demand for the bottles is modeled by the equation q = V15 – 2pwhere p is the price per bottle and q is the number of bottles sold per week.Suppose that your cost of materials for each bottle is 3 dollars.a) Calculate the price elasticity of demand when p = 3. Write a sentenceexplaining what this means in terms of the demand and the price.b) Find the range of prices for which demand is inelastic (assume p < 0)c) Find the price that would maximize your revenue.d) Find the price that would maximize your profit. (Include steps justifyingthat this is a maximum).

(Note: Since the question has multiple parts, only first three have been solved). (a) The…

a) Calculate the price clasticity of demand when p = 3. Write a sentence explaining what this means in terms of the demand and the price. b) Find the range of prices for which demand is inelastic (assume p<0) c) Find the price that would maximize your revenue.

a) Calculate the price clasticity of demand when p = 3. Write a sentence explaining what this means in terms of the demand and the price. b) Find the range of prices for which demand is inelastic (assume p<0) c) Find the price that would maximize your revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

You start a business making decorative reusable water bottles.
Suppose the demand for the bottles is modeled by the equation q = V15 – 2p
where p is the price per bottle and q is the number of bottles sold per week.
Suppose that your cost of materials for each bottle is 3 dollars.
a) Calculate the price elasticity of demand when p = 3. Write a sentence
explaining what this means in terms of the demand and the price.
b) Find the range of prices for which demand is inelastic (assume p < 0)
c) Find the price that would maximize your revenue.
d) Find the price that would maximize your profit. (Include steps justifying
that this is a maximum).

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