4. The inverse demand function for a certain product is given by p= 5-0.1q, where p denotes the unit price of the product and q denotes the amount demanded. a. Find the revenue r as a function of demand q. b. Find the marginal revenue when q = 5. c. Describe the economic meaning of your answer to b. Suppose now that the unit price is currently p= 3. d. Find the current point elasticity of demand and determine whether demand is (perfectly) inelastic, (perfectly) elastic or has unit elasticity at the current price level. e. Suppose the current price increases slightly. Do you expect the revenue to increase or decrease? Explain. f. Suppose the price increases from p=3 to p=3.06. Estimate the (absolute) change in revenue. g. Now compute the exact change in revenue for a price increase from p=3 to p=3.06.

ECON MICRO
5th Edition
ISBN:9781337000536
Author:William A. McEachern
Publisher:William A. McEachern
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.3P: (Categories of Price Elasticity of Demand) For each of the following absolute values of price...
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4. The inverse demand function for a certain product is given by p= 5-0.1q, where p denotes the unit
price of the product and q denotes the amount demanded.
a. Find the revenue r as a function of demand q.
b. Find the marginal revenue when q = 5.
c. Describe the economic meaning of your answer to b.
Suppose now that the unit price is currently p= 3.
d. Find the current point elasticity of demand and determine whether demand is (perfectly) inelastic,
(perfectly) elastic or has unit elasticity at the current price level.
e. Suppose the current price increases slightly. Do you expect the revenue to increase or decrease?
Explain.
f. Suppose the price increases from p=3 to p=3.06. Estimate the (absolute) change in revenue.
g. Now compute the exact change in revenue for a price increase from p=3 to p=3.06.
Transcribed Image Text:4. The inverse demand function for a certain product is given by p= 5-0.1q, where p denotes the unit price of the product and q denotes the amount demanded. a. Find the revenue r as a function of demand q. b. Find the marginal revenue when q = 5. c. Describe the economic meaning of your answer to b. Suppose now that the unit price is currently p= 3. d. Find the current point elasticity of demand and determine whether demand is (perfectly) inelastic, (perfectly) elastic or has unit elasticity at the current price level. e. Suppose the current price increases slightly. Do you expect the revenue to increase or decrease? Explain. f. Suppose the price increases from p=3 to p=3.06. Estimate the (absolute) change in revenue. g. Now compute the exact change in revenue for a price increase from p=3 to p=3.06.
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can u solve point d to g

 

Suppose now that the unit price is currently p= 3.

d. Find the current point elasticity of demand and determine whether demand is (perfectly) inelastic, (perfectly) elastic or has unit elasticity at the current price level.

e. Suppose the current price increases slightly. Do you expect the revenue to increase or decrease? Explain.

f. Suppose the price increases from p=3 to p=3.06. Estimate the (absolute) change in revenue.

g. Now compute the exact change in revenue for a price increase from p=3 to p=3.06.

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