Explanation Given Information: The statement is “If the increasing tax per unit sold actually leads to the decrease in tax revenue.” Explanation: If p = f ( q ) is the demand for the q units and price p, then at the points ( q A , p A ) , then, Elasticity of demand= η = − p q d q d p The revenue function is given as: R = p q , where q is the quantity and p is the price. Elasticity is related to revenue in a special way. The relation can be computed as follows with respect to p of the revenue function: Assume that: R = p q , Use partial derivation on both sides with respect to p, d R d p = p d q d p + q ( 1 ) Multiply and divide q on both the sides, d R d p = q q p d q d p + q = q ( p q d q d p <

MATHMATICAL APPLICATIONS FOR THE MANAGEM

11th Edition

ISBN: 9781305758063

Author: HARSHBARGER

Publisher: CENGAGE C

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Chapter 11, Problem 35RE

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Chapter 11 Solutions

MATHMATICAL APPLICATIONS FOR THE MANAGEM

Ch. 11.1 - 1. Ch. 11.1 - 2. If Ch. 11.1 - Prob. 3CP Ch. 11.1 - 4. Find . Ch. 11.1 - Prob. 1E Ch. 11.1 - Prob. 2E Ch. 11.1 - Prob. 3E Ch. 11.1 - Prob. 4E Ch. 11.1 - Prob. 5E Ch. 11.1 - Find the derivatives of the functions in Problems...

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The increasing tax per unit sold actually leads to the decrease in tax revenue.

Solution Summary: The author explains that increasing tax per unit sold can lead to the decrease in tax revenue. Elasticity is related to revenue in a special way.

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The increasing tax per unit sold actually leads to the decrease in tax revenue.

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