Respuesta :
Answer:
0.30
Demand is inelastic and an increase in price would lead to an increase in total revenue
Explanation:
P=300−0.02Q
Make q the subject of the formula by dividing through by 0.02
50P = 15,000 - Q
Q = 15,000 - 50P
Differentiate the above equation
[tex]\frac{dp}{dq} = -50[/tex]
Determine the value of q when p is 70
Q = 15,000 - 50(70) = 11,500
Elasticity = [tex][\frac{p}{q} . \frac{dp}{dq} ][/tex]
[[tex]\frac{70}{11500} . -50][/tex] = 0.30
Demand is inelastic and an increase in price would lead to an increase in total revenue
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
Elasticity of demand is 0.30
Also, the demand is inelastic which means that an increase in price would lead to an increase revenue.
Given that;
P = 300−0.02Q
We can make Q, subject of the formula.
P = 300−0.02Q
Dividing through by 0.02 we'll have
P = 300−0.02Q
50P = 15,000 - Q
Q = 15,000 - 50P
Using differentials,
[tex]\frac{d}{p} = -50[/tex]
We can then determine the value of q when p is 70
Q = 15,000 - 50(70) = 11,500
Elasticity = [tex]\frac{70}{11,500} . - 50 = 0.30[/tex]
Therefore, Elasticity of demand is 0.30 . Increase in price would lead to an increase in revenue.
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