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Suppose the demand for a product is given by QD = 50 – (1/2)P. a) Calculate...

Suppose the demand for a product is given by QD = 50 – (1/2)P.

a) Calculate the Price Elasticity of Demand when the price is $60.

b) What price should the firm charge if it wants to maximize its revenue?

c) Over what price range is demand elastic?

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Answer #1

ANswer

a)

P=60

then

Q=50-(1/2)*60=20 units

=======

b)

the revenue is maximum when the elasticity is -1. it is unit elastic demand

the revenue is maximum at a price of $50

=======

c)

the demand is elastic above unit elastic demand in absolute terms.

So the demand is elastic for a price range of

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