Question

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. 

Answer 1

$Soln,$

Demand curve $P=100-Q$

P= $30 -Price of the calculators.

Q= No of sales of calculators p.m.

$P=100-Q$

$\$30=100-Q$

$Q=70$

At optimal quantity demanded price of $\$30=70$ calculators sold p.m.

$TR=PQ$

$TR=\$30\times70$

Revenue collected p.m.$=\$2100$

ii. $PED=\frac{\%\Delta Q}{\%\Delta P}$

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

$\frac {dQ}{dP}=\frac {d}{dQ}(100-Q)$

$=0-1$

$ed=-1\times\frac{30}{70}$

$=-0.43$