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...
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