ECON 300 SSI18 101 Alex Tunberg Quiz Chapter 11 Quiz This 1

ECON 300 SSI18 101 Alex Tunberg Quiz: Chapter 11 Quiz This 1 pt p#50-05Q, what is the price elasticity of demand and revenue at Q 84? (Enter your response rounded to three decimal places and include a minus sign R $( (Enter your response as whole number)

Solution

The inverse demand equation : P = 50 - 0.5Q

Or, 0.5Q = 50 - P

Or, Q = 100 - 2P

Price elasticity of demand, e = dQ/dP * (P/Q)

From the demand curve we get,

dQ/dp = - 2

When Q =84, from the inverse demand curve we get,

P = 50 - 0.5(84) = 8

Therefore,

Elasticity of demand, e = -2 * (8/84) = - 0.191

Revenue, R = price * quantity = $ (8 * 84) = $ 672