Business, 24.03.2020 20:14 OzzyDaGod

1. (20 total points) Suppose the demand for a product is given by QD = 50 – (1/2)P. a) (10 points) Calculate the Price Elasticity of Demand when the price is $40.b) (5 points) What price should the firm charge if it wants to maximize its revenue?c) (5 points) Over what price range is demand elastic?

Answers: 3

Show answers

Answers

Answer from: shannydouglas

a) PED = 0.5

b) Total revenue is maximized at $50

c) PED is elastic beyond price $50

Explanation:

a) QD = 50 - (1/2)P

Price = $40

When substituted,

QD = 50 - (0.5 x 40)

QD = 30 units

Price elasticity of demand is the responsiveness of quantity demanded to a change in price. It is calculated by dividing the % change in quantity demanded by a % change in price. For this we require the quantity demanded for two different prices.

As an example, at price $30

QD = 50 - 0.5 x 30 = 35 units

Assume that price reduced from $40 to $30

% change in QD = Change in Qd / original Qd x 100

= (30-35)/30 x 100 = - 16.67%

% change in price = Change in price / original price x 100

= (40-30) / 40 x 100 = 33.33%

PED = 16.67 / 33.33 = 0.5

b) A PED that is less than 1 suggests that it is inelastic. This means that the percentage change in quantity demanded is lower than the percentage change in price. When PED is inelastic, firms can maximize its revenue by charging higher prices because a % change in quantity demanded is less than a % change in price.

For example, at price $30 sales would be = $30 x 35 = $1050

At price $40, sales would be = $40 x 30 = $1200

At price $50, sales would be = $50 x 25 = $1250

At price $60, sales would be = $60 x 20 = $1200

The price charged should be $50, since after this, TR starts to gradually decrease.For example, at price $51, sales is $51 x 24.5 = $1249.5

c) PED is price elastic if it is higher than 1. This means that the percentage change in quantity demanded is higher than the percentage change in price. This is common for products that are non-essentials or have a lot of substitutes.

When price changes from $50 to $51, quantity demanded falls from 25 units to 24.5 units.

Hence PED = [(25-24.5)/25] / [(50-51) /50)] = 1

PED is elastic after $50 which also explains why total revenue begins to fall as price increases beyond $50.

Answer from: Quest

Can you take a photo so i can see the table

Answer from: Quest

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.

Other questions on the subject: Business

Business, 22.06.2019 02:50, smariedegray

Acompany set up a petty cash fund with $800. the disbursements are as follows: office supplies $300 shipping $50 postage $30 delivery expense $350 to create the fund, which account should be credited? a. postage b. cash at bank c. supplies d. petty cash

Answers: 2

continue

Business, 22.06.2019 19:50, TylieW

Aproperty title search firm is contemplating using online software to increase its search productivity. currently an average of 40 minutes is needed to do a title search. the researcher cost is $2 per minute. clients are charged a fee of $400. company a's software would reduce the average search time by 10 minutes, at a cost of $3.50 per search. company b's software would reduce the average search time by 12 minutes at a cost of $3.60 per search. which option would have the higher productivity in terms of revenue per dollar of input?

Answers: 1

continue

Business, 22.06.2019 21:10, winterblanco

The blumer company entered into the following transactions during 2012: 1. the company was started with $22,000 of common stock issued to investors for cash. 2. on july 1, the company purchased land that cost $15,500 cash. 3. there were $700 of supplies purchased on account. 4. sales on account amounted to $9,500. 5. cash collections of receivables were $5,500. 6. on october 1, 2012, the company paid $3,600 in advance for a 12-month insurance policy that became effective on october 1. 7. supplies on hand as of december 31, 2010 amounted to $225. the amount of cash flow from investing activities would be:

Answers: 2

continue

Business, 22.06.2019 21:10, kalawson2019

You own a nonunion company with 93 nonexempt employees. all of these employ- ees pack books into boxes for shipment to customers throughout the united states. because of wide differences in performance, you have decided to try performance appraisal, something never done before. until now, you have given every worker the same size increase. now you want to measure performance and reward the best performers with bigger increases. without any further information, which of the five types of appraisal formats do you think would be most appropriate? justify your answer. do you anticipate any complaints, or other comments, from employees after you implement your new system?

Answers: 1

continue

You know the right answer?

1. (20 total points) Suppose the demand for a product is given by QD = 50 – (1/2)P. a) (10 points) C...