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Exercise 1 ABC, Ltd. specializes in the production of a certain product X. The demand for its new brand of product X is given
4. At the total revenue-maximizing price, what is the price elasticity of demand for product X? 5. Illustrate your answers to
Exercise 2 The demand curve for a product is given by Q = 1200 - 3P% - 0.1P, where P, = $300 1. What is the own price elastic
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Answer #1

Exercise 1

= 140 - u px Qb = 140-4619 2 px Elasticity of Demand = e = doo +/ 100 = -0.4025 Totol Revenue = PxQ Marginal Revenue = JCPQ)Ectramari Marginal Revenue = 10 3.5 - 10 ( 5) - 205 35Total Revenue = Px Qx = thods - 0 d (Total Revenue) = 140 - 20x = Qy = 70e -Price i Raure 35 o Tolalro s Demand 35 35 70100 Tyd Quantity 140 marginal RevenueExercise 2 a = 1200-3(140) 0.1(300) = 1200 - 420 30 = 750 Own Price Closticity = Sex - 0.56 Demond is inclastic If it changes240 x = 2x Qx = 1o - 3(240) -0.1(300) 2.700 - 725 - 30 = 450 (450 -1.6 Demond is lastic If it charges above 290, its total reCross Price elasticity = JQx . SQx = -0.1 Qra 120 - 3(140) -foo) ax = 950 Cross crasticity = (-0.1) ( 3000 750 -0.04 C Negati

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