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Maximum Profit and Average Cost
- Thread starter parise123
- Start date
to calculate price elasticity of demand you use the formula (dQ/dp)*(P/Q)
your demand function is q = 256 - 0.01p^2 take the derivative of that with respect to p. so -0.02p and sub that into your equation.
-0.02*(p/256 - 0.01p^2)
then sub in your values for p
if the value ( I can't remember if its supposed to be absolute value or not) is less than one then demand is inelastic
if the value is greater than one then demand is elastic
if the value is equal to one then demand is unit elastic
Hope that helps
your demand function is q = 256 - 0.01p^2 take the derivative of that with respect to p. so -0.02p and sub that into your equation.
-0.02*(p/256 - 0.01p^2)
then sub in your values for p
if the value ( I can't remember if its supposed to be absolute value or not) is less than one then demand is inelastic
if the value is greater than one then demand is elastic
if the value is equal to one then demand is unit elastic
Hope that helps
I don't know maybe something along these lines
revenue is the total units sold * price right?
So , if demand is elastic then a small change in price will cause a big change in quantity sold. So for example if the price was lowered then there could be a large increase in quantity sold. The number you get for elasticity will tell you by how much price and quantity is changing.
If the demand is inelastic then a large change in price would cause a very small change in quantity, because people will buy the good anyways. So for example if you raise the price there will be only a small decrease in quantity sold. Revenue is probably going to increase
revenue is the total units sold * price right?
So , if demand is elastic then a small change in price will cause a big change in quantity sold. So for example if the price was lowered then there could be a large increase in quantity sold. The number you get for elasticity will tell you by how much price and quantity is changing.
If the demand is inelastic then a large change in price would cause a very small change in quantity, because people will buy the good anyways. So for example if you raise the price there will be only a small decrease in quantity sold. Revenue is probably going to increase