The weekly sales of Honolulu Red Oranges is given by q 810

The weekly sales of Honolulu Red Oranges is given by q = 810 9p Calculate the price elasticity of demand when the price is $30 per orange (yes, $30 per orange†).

Interpret the Answer:

The Demand is going (up/down) by _____ % per 1 % increase in price at that price level.

Also.

a.) Calculate the price that give a maximum weekly revenue.

b.) Find this maximum Revenue.

Solution

sales function is given by

q = 810 - 9p

a) to find price that gives maximum revenue

we equate sales functio to 0 and solve for p

810 - 9p=0

9p = 810

p = 90

at p = $90 there will be maximum revenue

b) revenue function is given by R = p(810-9p) = 810p - 9p^2

maximum revenue = 810(90) - 9(90)^2 = 0