Question

14. After a careful statistical analysis, the Chidester Company concludes that the demand function for its product is "Q =150-2P+0.5P, +0.031, where Q is the quantity demanded of its product, P is the price of its product, P, is the price of its rival's product, and / is per capita disposable income (in dollars). At present, P = $15, P= $18, and I = $3,000. What is the price elasticity of demand for the firm's product? A. - 0.1730. B.-0.1570. C.-0.1370. D. -0.1630. E. None of the above. 15. Using the information in question #14, calculate the change in total revenue if the firm raises the price of its product from $15 to $20 A. an increase of $895. B. a decrease of $895. C. an increase of $219. D. a decrease of $219. E. None of the above. 16. Using the information in question #14, what is the income elasticity of demand for the firm's product? A. 0.1730. B. 0.411. C. 0.0411 D. 0.141. E. None of the above.

Answer 1

product 14) The demand function for its ist .: Q = 150-2P+0.5 Pr +0:03 I Where. Q= quantity demanded :P = price of its product Pri Price of of it's rival's product I= .pn capite disposable in come. (ein dollars) Now at Presint p= $15, Pg = $18, . Ia $ 300 3,000 Now Substituting these valus we get? Q = 150 - (2x15) +65 x 18740-03X3000) .=) Q = 219 Now, Q 150-2P +.0.5 pp 70.03 I to see - 2 Now price elasticity of demand for the firm's products : Es substituting dao 2-2 , P = 4.15 and Q=219 15 _ =-0.1370. an 21 CS wenget 'with CamScanner

ul an swin ist e, -0.1370 152 hence Now at Pi= $15, Q1 = 2219 total revine TRI=(P,Q) = 115X219) = $ 3285 $20 Pr = $18 I = 3,000 Now. When price increasis to Unline . P . P = $20, in the demand for ction we.anti- Q = 150 - (2 X20) + (0.5x 18) +0.03 X3, 000) ..=) Q = 209 / Now. total reueme. why P2 = $20 and Q2 = 209 I will ber TR2 = ( P2 Q2) = 4(20x209) = $ 4180. 1 Hace to fall sevene dicas shot by & C 4180 - 3285) = $.895 Huce answn will be As an increase of $895 f CS Scanned with CamScanner

- 16) using information in Qustion #14 . le at puce P= $15 Q=219 Now, Q = 150- 2P+0.5 pp 10.03I 24 = 0.03 Now in come elasticity of demand ! Eye - 30 substituting a = 0.03, I = $3,000 2 I and Q = 219 we gut! EI = 0.03 ( 23.07 ) - 0.411 B. 0:4 17 Huice auswa will ber 17) using information in pustion #14 e at price: P = $15, Q = 219, and Pr = $ 18 Now, Q = 150-2P+0.5 pp +0.03 I 0.5 s power poi CamScanner

Now cross between its isi- price elasticity of demand (Ee) product and it's rival's product substituting do = o.s, Pr = $18 and Q = 219, we geti Ee - 0.5 ( 18 ) = 0.0411 . (219. 0.04.11. the answn will be Huce cs Scanned with CamScanner