Question 6. PDO company specializes in rapid parcel delivery. Cross sectiohal regional "hubs" were used to estimate the demand equation for the company's services. Holding income and prices of other goods constant, the demand equation is estimated to be P 66Q-1A where p is the price per pound and Q is pounds delivered. The marginal cost of delivery is constant and equal to Le 2 per pound. a. What is the point price elasticity of demand? b. What are the profit maximizing price and quantity? What are the total revenue maximizing price and quantity? %3D Guod

Question 6. PDO company specializes in rapid parcel delivery. Cross sectiohal regional "hubs" were used to estimate the demand equation for the company's services. Holding income and prices of other goods constant, the demand equation is estimated to be P 66Q-1A where p is the price per pound and Q is pounds delivered. The marginal cost of delivery is constant and equal to Le 2 per pound. a. What is the point price elasticity of demand? b. What are the profit maximizing price and quantity? What are the total revenue maximizing price and quantity? %3D Guod

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PRICE (Dollars per unit) 350- 225 175 50 0 12 Region Between Y and Z Between W and X Between X and Y True Z False X For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. 42 54 QUANTITY (Units) 1 84 W Demand True or False: The slope of the demand curve is equal to the value of the price elasticity of demand. Elastic Inelastic Unit Elastic
(a) Consider a firm that is particularly interested in estimates of elasticities. It discovers that its cross-price elasticity of demand between good A, which it sells and good B, which another firm sells is +5.3. Its price elasticity of demand for good A is estimated as -2.5 and its income elasticity of demand is +2.5, while the price elasticity of supply is +0.3. Comment on the implication of these figures for the firm. Discuss the information that this provides to the firm and how it can use this to develop its product, pricing and overall strategy.
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Price Elasticity of Demand Problem Business has price elasticity of -1.5 They sold 300 units at $10 each If they cut the unit price by 5% how many units would they sell and what would be the effect on revenue?
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