Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Chapter 15, Problem 15.10P
Inverse elasticity rule
Use the first-order condition (Equation 15.2 ) for a Cournot firm to show that the usual inverse elasticity rule from Chapter 11 holds under Cournot competition (where the elasticity is associated with an individual firm's residual
where
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S&S Manufacturing Co. supplies automotive parts in three outlets in Selangor. The inverse demand equations faced by each outlet are as follows:
Outlet 1: P = 150 – 2.50 Q1
Outlet 2: P = 200 – 8.40 Q2
Outlet 3: P = 450 – 0.75 Q3
a. If the firm charges RM100 per unit, determine the quantity demanded by each outlet.
b. Given the price, compute the own price elasticity for each outlet and identify which outlet is the most responsive to price change. Why?
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is between $55 and $70.
The price that you should set would range between $ and $. (Round your answers to two decimal places.)
If you refine your estimate of the marginal cost to $80, the price you should set would now range between $
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5.21 explain
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