Consider a market with the following demand curve: Q^d=1000-Yxp Assume the marginal cost of the only firm supplying this market as MC=Q/2 A.Derive an expression of elasticity of demand in terms of Y. Show your work B.Derive an expression for the slope of the isoprofit curve of this firm in terms of Y. Explain. |c.Now derive an expression for the markup chosen by this firm in terms of Y.

Consider a market with the following demand curve: Q^d=1000-Yxp Assume the marginal cost of the only firm supplying this market as MC=Q/2 A.Derive an expression of elasticity of demand in terms of Y. Show your work B.Derive an expression for the slope of the isoprofit curve of this firm in terms of Y. Explain. |c.Now derive an expression for the markup chosen by this firm in terms of Y.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q1. Given cost function f(x) = 1/2(c)(x2), where c>0, and demand curve y(z) = z-a, where a > 1 a). Compute price elasticity of demand. b). Draw a diagram showing marginal cost and marginal revenue c). Find price and output that maximize profits d). Find the markup (price divided by marginal cost). Does it increase or decrease based on elasticity of demand?