Answer to Question #207981 in Microeconomics for Mwaka

Question

The monthly market demand curve for calculators among engineering students is given by 

P = 100 – Q. where P is the price per calculator in dollars and Q is the number of calculators purchased per month. If the price is UD$ 30, how much revenue will calculator makers get each month? Find the price elasticity of demand for calculators at this point. What should calculator makers do to increase revenue?

Answer 1

$P=100-Q\\Q=100-P$

substituting P=UD$ 30

$Q=100-30\\Q=70$

$Ped=\frac{\Delta Q}{\Delta P}\times \frac{P}{Q}$

$\frac{\Delta Q}{\Delta P}=-1$

$Ped=-1\times\frac{30}{70}=-0.429$

Ped<1

The demand is inelastic and therefore a change in price will have little or no effect on the demanded quantity hence to increase revenue the price should be increased