Answered: In this problem, p is in dollars and q…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...

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Question

In this problem, p is in dollars and q is the number of units.

(a)

Find the elasticity of the demand function

2p + 3q = 270

at the price

p = 15.

(b)

How will a price increase affect total revenue?

Since the demand is elastic, an increase in price will increase the total revenue.Since the demand is unitary, there will be no change in the revenue with a price increase. Since the demand is inelastic, an increase in price will increase the total revenue.Since the demand is elastic, an increase in price will decrease the total revenue.Since the demand is inelastic, an increase in price will decrease the total revenue.

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