Using the demand function that you estimated in the previous problem Calculate demand and total revenue when the price is $7 Q= -2472x7+44,496= -17,304+44,496= 27,192 Total revenue=PxQ=7x27,192= $190,344 Calculate demand and total revenue when the price is $9 Q= -2472x9+44,496=22,248+44,496=22,248 Total revenue = PxQ= 9x22,248=$200,232 Calculate demand and total revenue when the price is $11 Q=2472x11+44,496= -27,192+44,496=17,304 Total revenue= PxQ= 11x17,304=$190,344 Using the demand function that you estimated in the first problem Calculate the point price elasticity when the price is $7. In addition, is demand inelastic, unit elastic or elastic at this price? Q=-2472P+44,496 = -2472*7+44,496= 27,192 Quantity at price -2472*(7/27,192)=0.6363 Point price elasticity 0.636 = 0.64 Absolute value Point price is less than 1 so demand is inelastic when price equals to $7 Calculate the point price elasticity when the price is $9. In addition, is demand inelastic, unit elastic or elastic at this price? Q= -2472P+44,496 = 9* -2472=22,248 = -2472*9/ 22,248= -1 Point price elasticity Absolute value is 1 and since point price elasticity is 1, demand is elastic when price equals to $9 Calculate the point price elasticity when the price is $11. In addition, is demand inelastic, unit elastic or elastic at this price? Q=-2472P+44,496 =-2472*11+44,496=17,304 Quantity at price =-2472*11/17,304+ -1.5714 Absolute value = 1.57>1 demand is elastic when price equals to $11
The question is the last bolded test. You need the previous questions to answer the last. Thank you for your time and help.
You are the manager of a firm that sells CR2032 batteries for car key fobs and other electronic goods. You typically sell the fobs for $7 for a four-pack and sell an average of 27,192 four-packs per month. Due to increased labor costs, you decide to raise the
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- Assuming that your firm’s
demand function is linear (i.e., takes the form ), calculate the linear demand function
- Assuming that your firm’s
22,248-27,192/9-7= -4944/2= -2472
Demand equation as 27,192 = a-2472(7) => a=27192+17304 =>a=44,496
27192= -2472x7+b
27192= -17304+b
27192+17304=44,496
Demand function is Q= -2472P+44,496
- . Using the demand function that you estimated in the previous problem
- Calculate demand and total revenue when the price is $7
Q= -2472x7+44,496= -17,304+44,496= 27,192
Total revenue=PxQ=7x27,192= $190,344
- Calculate demand and total revenue when the price is $9
Q= -2472x9+44,496=22,248+44,496=22,248
Total revenue = PxQ= 9x22,248=$200,232
- Calculate demand and total revenue when the price is $11
Q=2472x11+44,496= -27,192+44,496=17,304
Total revenue= PxQ= 11x17,304=$190,344
- Using the demand function that you estimated in the first problem
- Calculate the point price elasticity when the price is $7. In addition, is demand inelastic, unit elastic or elastic at this price?
Q=-2472P+44,496
= -2472*7+44,496= 27,192 Quantity at price
-2472*(7/27,192)=0.6363 Point price elasticity
0.636 = 0.64 Absolute value
Point price is less than 1 so demand is inelastic when price equals to $7
- Calculate the point price elasticity when the price is $9. In addition, is demand inelastic, unit elastic or elastic at this price?
Q= -2472P+44,496
= 9* -2472=22,248
= -2472*9/ 22,248= -1 Point price elasticity
Absolute value is 1 and since point price elasticity is 1,
- Calculate the point price elasticity when the price is $11. In addition, is demand inelastic, unit elastic or elastic at this price?
Q=-2472P+44,496
=-2472*11+44,496=17,304 Quantity at price
=-2472*11/17,304+ -1.5714
Absolute value = 1.57>1 demand is elastic when price equals to $11
- (Maximizing Revenue and Profit).
- Based on your calculations in questions 3, what price would you expect to maximize revenue? Is this consistent with your answers to question 2.
- Assuming that your firms total cost function is, TC (Q) = $21,128+4Q profits when the prices are $7, $9, and $11? Are profits also highest at the price that maximizes revenue?
Hint: You will need to use the quantities demanded and revenues you calculated in question 2 to calculate profits.
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- Assuming that your firms total cost function is, TC (Q) = $21,128+4Q profits when the prices are $7, $9, and $11? Are profits also highest at the price that maximizes revenue?
by Bartleby Expert- Assuming that your firms total cost function is, TC (Q) = $21,128+4Q profits when the prices are $7, $9, and $11? Are profits also highest at the
price that maximizes revenue?
by Bartleby Expert
