For most products, higher prices result in a decreased demand, whereas lower prices result in an increased demand. Let d = annual demand for a product in units p= price per unit Assume that a firm accepts the following price-demand relationship as being realistic: d = 800 – 10p where p must be between $20 and $70. a. How many units can the firm sell at the $20 per-unit price? At the $70 per-unit price? b. What happens to annual units demanded for the product if the firm increases the per- unit price from $26 to $27? From $42 to $43? From $68 to $69? What is the sug- gested relationship between the per-unit price and annual demand for the product in units? c. Show the mathematical model for the total revenue (TR), which is the annual demand multiplied by the unit price. d. Based on other considerations, the firm's management will only consider price alterna- tives of $30, $40, and $50. Use your model from part (b) to determine the price alterna- tive that will maximize the total revenue. What are the expected annual demand and the total revenue corresponding to your recommended price? е.

For most products, higher prices result in a decreased demand, whereas lower prices result in an increased demand. Let d = annual demand for a product in units p= price per unit Assume that a firm accepts the following price-demand relationship as being realistic: d = 800 – 10p where p must be between $20 and $70. a. How many units can the firm sell at the $20 per-unit price? At the $70 per-unit price? b. What happens to annual units demanded for the product if the firm increases the per- unit price from $26 to $27? From $42 to $43? From $68 to $69? What is the sug- gested relationship between the per-unit price and annual demand for the product in units? c. Show the mathematical model for the total revenue (TR), which is the annual demand multiplied by the unit price. d. Based on other considerations, the firm's management will only consider price alterna- tives of $30, $40, and $50. Use your model from part (b) to determine the price alterna- tive that will maximize the total revenue. What are the expected annual demand and the total revenue corresponding to your recommended price? е.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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