Demand for carpet cleaner rentals at a rental store is described by the equation: Q = 4,000 - 500P, where Q denoted the number of carpet cleaner rental per week and P is the rental price in dollars. Determine the point price elasticity of demand at (1) P = $3 and (2) P = $4.5 and (3) comment on the change in elasticity. (4) Ignoring the previous parts, what is the appropriate price to set in order to maximize profit for a good with a marginal cost of $35 and a demand elasticity of -2?
Demand for carpet cleaner rentals at a rental store is described by the equation: Q = 4,000 - 500P, where Q denoted the number of carpet cleaner rental per week and P is the rental price in dollars. Determine the point price elasticity of demand at (1) P = $3 and (2) P = $4.5 and (3) comment on the change in elasticity. (4) Ignoring the previous parts, what is the appropriate price to set in order to maximize profit for a good with a marginal cost of $35 and a demand elasticity of -2?
Chapter5: Price Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 17SQ
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Transcribed Image Text:Demand for carpet cleaner rentals at a rental store is described by the equation:
Q = 4,000 - 500P, where Q denoted the number of carpet cleaner rental per week
and P is the rental price in dollars.
Determine the point price elasticity of demand at (1) P = $3 and (2) P = $4.5 and (3)
comment on the change in elasticity.
(4) Ignoring the previous parts, what is the appropriate price to set in order to
maximize profit for a good with a marginal cost of $35 and a demand elasticity of -2?
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