Question

a) Using the table provided and Excel functions, calculate quantity demanded for each of the prices given.                                                                                                                         
b) Using the prices provided and quantity demanded you calculated in part a, calculate elasticity (in absolute terms) for each point along the demand curve.                                                                                                                                      

                                                Q =1000 - 150 P               

Price	Quantity	Elasticity
6.00
5.75
5.50
5.25
5.00
4.75
4.50
4.00
3.75
3.50
3.20
3.00

                               

                               

                                                                                               

                                                                                                                                                                                                                               

c) At which prices is demand elastic, inelastic, and unit elastic? Enter your answers using cell references to the table above.               

	Price From	Price To
Elastic
Inelastic

                               

The demand is unit elastic at some price between ____ and ____.

d) Are there prices between $3 and $6 which you are certain the company should not charge based on the elasticities you observe? Assume your ice cream must be priced in $.25 increments.                                                                                                                                     

                The company should not charge below?                                                                                                               .                              

e) If the goal of this firm was to maximize revenue, what price would you recommend they charge for a pint of ice cream? Use functions and Excel's Solver functionality.                                                                                                                                   

                Price (P) =                                                                                                                                          

                Quantity (Q) =                                                                                                                                  

                Revenue =                                                                                                                                         

Answer 1