Assume that the demand of chocolate of a local producer is given by q = 9-√p in hundreds of kilograms, where p = [0, 81] is the price of a kilogram in USD. 1. Compute the elasticity of the demand as a function of p, and find where it is unit elastic, elastic, and inelastic. 2. Compute the revenue R(p) in USD as a function of p. Careful of units! 3. Compute R'(25). Interpret this quantity. Remember to write down units. 4. What is the sign of R'(25)? Considering what you obtained in Question 1, does this make sense? Why? 5. Now, compute the revenue R(q) in USD as a function of q. Careful of units! 6. Compute the marginal revenue Rm (9). 7. Compute Rm (4). Interpret this quantity. Remember to write down units. Since q= 4 corresponds to p= 25, why is the result different from Question 3?

Assume that the demand of chocolate of a local producer is given by q = 9-√p in hundreds of kilograms, where p = [0, 81] is the price of a kilogram in USD. 1. Compute the elasticity of the demand as a function of p, and find where it is unit elastic, elastic, and inelastic. 2. Compute the revenue R(p) in USD as a function of p. Careful of units! 3. Compute R'(25). Interpret this quantity. Remember to write down units. 4. What is the sign of R'(25)? Considering what you obtained in Question 1, does this make sense? Why? 5. Now, compute the revenue R(q) in USD as a function of q. Careful of units! 6. Compute the marginal revenue Rm (9). 7. Compute Rm (4). Interpret this quantity. Remember to write down units. Since q= 4 corresponds to p= 25, why is the result different from Question 3?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 7PA: Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate...

See similar textbooks

Similar questions

Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
According to economic theory, the demand x for a quantity in a free market decreases as the price p increases (see the figure). Suppose that the number x of DVD players people are willing dx (A) Find 9,000 to buy per week from a retail chain at a price of $p is given by x = 10 sp<70. 0.3p + 1' dx Answer parts (A), (B), and (C). dp 4500- (B) Find the demand and the instantaneous rate of change of demand with respect to price when the price is $30. Write a brief interpretation of these results. The demand is x = when the price is $30. 2250- 9,000 The instantaneous rate of change of demand with respect to price is when the price is X = 0.3p + 1 $30. Write a brief interpretation of these results. p. 0- 40 80 At a price level of $30, the demand is DVD players per week and demand is Price (dollars) V at the rate of (C) Use the results from part (B) to estimate the demand if the price is increased to $31. Demand .....
These questions require application of economic theory relating to elasticity of demand andsupply. All calculations must be shown in full. Answer ALL the questions.Q.3.1 A store that sells maize meal discovers that when the price of 1kg maize meal IsR24 per kilogram, the quantity demanded is 306 kgs per week. When the pricedecreases to R21 per kg, then the sales increase to 340 kgs per week. Use thisinformation to answer questions Q.3.1.1 and Q.3.1.2 below.Q.3.1.1 Determine the price elasticity of maize meal using the Arc method. (5)Q.3.1.2 Discuss the relationship between the price elasticity of maize mealand the total revenue the store received from the sales. Advise thestore on an appropriate pricing strategy.(7)Q.3.2 The store selling maize meal makes a further discovery, when the price of ricechanges from R30 per kg to R26 per kg, then the quantity of rice demandeddecreases from 1360 kg per month to 1238 kg per month. Use this informationto answer Q.3.2.1 and Q.3.2.2 below.Q.3.2.1…
Assume that the price cross elasticity of demand for muffins with respect to the price of coffee is (negative) - 0.7. d. What does this tell you about the relationship between muffins and coffee when the price of coffee increases by 10%? What will happen to the demand for both muffins and coffee?
(1) if the price of orange juice rise 10% , and a as result quantity demanded falls by 10% , then one can conclude that the demand for orange juice (a) is perfectly elastic (b) is inelastic (c) has a constant elasticity (d) has a unitary elasticity
Suppose that when income decreases by 4%, the quantity of margarine demanded rises by 1%. Knowingthis, the income elasticity (EI) for margarine is(A) EI = .25(B) EI = -1/4(C) EI = -4(D) EI = -3
Determine the cross elasticity of demand, if the price of gasoline has risen from 10 rubles per liter to 15 rubles, and the demand for cars has fallen by 20%.
When the price of mustard oil increased from 70 taka per litre to 90 taka per litre thequantity demanded in the market fell from 47,000 litres to 40,000 litres. Using the pointelasticity method, calculate the price elasticity of demand of mustard oil. What type ofdemand does mustard oil have?
if the price elasticity of a commodity is 1.5. Then it's elasticity is :- (A) Inelastic (B) unit elastic (C) elastic (D) none of the above
Show youir solution (Do not drop the sign of the Elasticity) 1.Assume that the Price Elasticity of Demand for a product is -.32. Currently, at the price of P 230.00, the demand is 2300 units. The seller is intending to increase the price by 4.5%, what will be the new demand for the product? Will the seller increase his price or not? 2.If the price of the product is reduced by 6.25% from P 39.50, what will be the new quantity demand if the original demand is 8000 units and the computed Price elasticity of Demand is -1.38? Should the price be reduced or not?
Suppose that you observe that when the price of cigarettes rises by 10%, the quantity of cigarettes purchased falls by 8.7%. This implies that cigarettes are price in demand and that the price elasticity of demand is equal to elastic; 1.15 inelastic; 1.15 inelastic; 0.87 O elastic; 0.87
QUESTION The price elasticity of demand for cigarettes is approximately -0.5. Based on this information, istrue or false (explain with details) If the price of a pack of cigarettes increases by 50%, the quantity consumed will decrease by 50%.