Compare Elixir’s profit maximizing price with the marginal cost of producing the profit-maximizing output. At the profit-maximizing price, is the demand for Elixir water inelastic or elastic Elixir Spring produces a unique and highly prized miner- al water. The firm's total fixed cost is$5,000 a day, and its marginal cost is zero. The table shows the demand schedule for Elixirwater.PriceQuantity(dollars per bottle) (bottles per day)1082,00064,0006,0008,0004210,000

We are going to use profit maximising conditions to solve this question. First we need to find the demand function for this given schedule. When Price =$8 , Quantity = 2000 8 = a-2000b When Price =$6 , Quantity = 4000 6 = a-4000b After solving these two equations we get, 2= 2000b b=1/1000 and a = 6+4000*(1/1000) = 10 Hence the demand function is P =10-Q/1000 This firm looks like a monopolist. From obtained profit maximising output, profit maximising price = 10-Q/1000 = 10-5000/1000 = $5 Profit maximising output is chosen where Marginal revenue equals to Marginal Cost Revenue =Price *Q = (10-Q/1000)*Q = 10Q-Q^2/1000 Marginal Revenue = dR/dQ = 10-2Q/1000 = 10-Q/500 Marginal Cost=0 10-Q/500 = 0 Hence profit maximising output is Q = 5000 units. Lets check for a profit maximising price and quantity whether the demand is elastic or inelastic. elasticity = e=(dQ/Q)*(P/dP) e = (dQ/dP)*(P/Q) P = 10-Q/1000 Q = 10000-1000P dQ/dP = -1000 e = (-1000)*(5/5000) = -1..(Mineral water being normal good we have a negative sign) Absolute elasticity = 1 = unit elastic ( Neither elastic or inelastic)

Answered: Compare Elixir’s profit maximizing…

Business

Economics

Compare Elixir’s profit maximizing price with the marginal cost of producing the profit-maximizing output. At the profit-maximizing price, is the demand for Elixir water inelastic or elastic

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: if the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80…

A: The price elasticity of demand for a product is 2.5.The price reduces from $2.00 to $1.80.

Q: Suppose the price of Merinda falls from N$16 to N$12 per bottle and the quantity demanded rises from…

A: Elasticity measures the responsiveness of quantity demanded to changes in price

Q: Suppose that the price of a good falls from $12 to $6 , and the quantity demanded changes from 300…

A: Calculate the percentage change in quantity demanded:Change in quantity demanded = (Final quantity -…

Q: The price elasticity of demand for personal computers is estimated to be −1.1. If the price of…

A: Price elasticity of demand is the relative change in quantity demanded caused by change in price.

Q: Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from…

A: Given:The values of the prices elasticity areP1 = $2P2 = $1.90Q1 = 110Q2 = 122Objective:With the…

Q: The price of widgets has gone from 2.00 to 5.00 in six months, while the quantity purchased of…

A: Cross price elasticity measures the %change in demand of a good due to unit % change in price of…

Q: Explain why the coffee shop manager should measure elasticity using the mid-point method in…

A: Midpoint method of calculating the elasticity consider the average quantity and average price while…

Q: The market demand for a product is Q=240-4P. At what price is the price elasticity of demand equal…

A: The degree to which the effective desire for commodity changes as the price(P) of that commodity…

Q: Calculate the price elasticity of demand for healthcare in Japan using on data from year 2000.…

A: Price elasticity of demand measures the responsiveness of change in quantity demanded due to change…

Q: What does the price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic,…

A: Formula to calculate price elasticity:- ed=Percentage…

Q: The coefficient of price-elasticity of supply for a product is 2.5 if

A: Definition: economics alludes to the coefficient of elasticity as the price elasticity of demand, a…

Q: Genovia has experienced exceptional growth in recent years. Its GDP per capita (or Income) has…

A: Given:Initial income=io=$30,000New income=i1=$50,000Initial demand for personal…

Q: i owned both of the two jerry garcia autographed lilthographs in existence. I sold one on eBay for a…

A: Meaning of Price Elasticity of Demand: The price elasticity of demand refers to the situation…

Q: How would you describe the elasticity of mable's demand for milk

A: Price elasticity of demand is a measures the quantity of change in demand with respect to the change…

Q: Suppose price of a commodity rises by 10% , then supply by a firm increases by 50% Calculate…

A: # The elasticity of supply is a measure of the change in quantity supplied due to change in price.…

Q: Fred gathered data on the price and quantity demanded of chocolate over the course of a week. He…

A: A decent elasticity of demandt is a proportion of how delicate the amount requested is to its cost.…

Q: Importance of price elasticity

A: Price elasticity measures how responsive a good's supply and demand are to price changes. It is…

Q: What does the price elasticity of demand coefficient of 1.2 mean? Does the product have an…

A: Price elasticity of demand measures the quantitative relationship between the price and quantity…

Q: If elasticity of demand is 0.61 and change in quantity demanded is 32% Find change in Price

A: According to the above mentioned question, we have:- elasticity of demand = 0.61 Change in quantity…

Question

Compare Elixir’s profit maximizing price with the marginal cost of producing the profit-maximizing output. At the profit-maximizing price, is the demand for Elixir water inelastic or elastic

Elixir Spring produces a unique and highly prized miner- al water. The firm's total fixed cost is
$5,000 a day, and its marginal cost is zero. The table shows the demand schedule for Elixir
water.
Price
Quantity
(dollars per bottle) (bottles per day)
10
8
2,000
6
4,000
6,000
8,000
4
2
10,000

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Introduction:

VIEW

Approach:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

When a certain brand of dog food sells for $20 per bag, 10,000 units are sold; when the price changes to $22, 7000 units are sold. Calculate price elasticity of demand for the dog food, carefully folowing all numeric instructions. Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary; if you round on intermediate steps, use four places.
Elasticity of demand of -0.4 means inelastic demand True/False
use the price–demand equation to find the values of p for which demand is elastic and the values for which de-mand is inelastic. Assume that price and demand are both positive. x = f(p) = 210 - 30p
The short run elasticity of demand between palm oil and soybean oil is 0.103. The quantity demanded for palm oil is 10 million metric tonnes at the current price USD 1480 per metric ton of soybean oil. Calculate the quantity demanded of palm oil if the price per metric ton of soybean oil decreases to USD 1400.
The demand function for a certain make of ink-jet cartridge is the following where p is the unit price in dollars and x is the quantity demanded each week, measured in units of a thousand. p= -0.02x² -0.2x+6 Compute the elasticity of demand when x = 11. (Round your answer to two decimal places.) 0.22 Determine whether the demand is inelastic, unitary, or elastic when x = 11. elastic inelastic O unitary
The change in quantity supplied is 60% and the change in price is 40% Calculate the value of elasticity of supply
Find the elasticity of demand when 15 water bottles are sold.
The Congressional Budget has estimated the following responses over a 10-year period to a 10 percent rise in cigarette prices. long run price elasticities for cigarettes Age group percent decline in smoking 12-17 years 5% 18 years 4.5% 19-39 years 4% 40 years and older 1.5% what is the long-run price elasticity of demand for cigarettes among 40-year olds?
Using data on automobile purchases, P. McCarty (REStat 1996) estimated the following elasticities for compact cars sold in the United States. Own elasticity of demand Income Elasticity Cross Price* - 0.87 1.70 .82 * Responsiveness of demand for compact cars to changes in the price of other types of car models, such as luxury cars. а) What is the percent change in quantity demanded for compact cars given a 2 percent decrease in the price of compact cars? b) What is the percent change in demand for compact cars given a 2 percent decrease in the price of other car models? c) What is the percent change in demand for compact cars given a 2 percent decrease in income? d) Is demand for compact cars elastic or inelastic? Explain briefly. e) Would a decrease in the price of compact cars generate more or less revenue from the sale of compact cars? f) Are compact cars a normal or inferior good? Explain briefly. 5.
suppose a pharmaceutical company considers increasing the price of insulin tm $125 per vial to $300 per vial. whenthe price was $125, the company sold 100, 000 vials per day. the company knows its price elasticity is .25. calculate thepercentage change in quantity demanded that would result in a price elasticity of .25. show your work
A fall in the price of radishes from $1 to $0.60 per bushel increases the quantity demanded from 19,000 to 21,000 bushels. The price elasticity of demand is Question 7 options: 1 5 0.2 1.2 .8
The demand and supply for cola in a market is represented by QD = 15 – 10P & QS = 40P – 50 Calculate the point price elasticity of demand at the equilibrium