Question

FILE TOOLS VIEW Exercise1 function equation (2) G PROTECTED VIEW Be careful -files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected ECON 1150 (182) Semester 2, 2018/19: EXERCISE SET 1 Question 1 The demand function for a textbook is given by p-500-х 4 where x is the number of textbooks that can be sold at a price of Şp per textbook. a. Rewrite the demand function as - f(p). Identify the slope and interpret the value. b. Sketch the demand function. c. Find the revenue function R-R(). d. If each textbook is obtained from a supplier at a cost of $100 per book, find the profit function. Find the profit when 600 books are sold e. Question 2

Answer 1

p = 500 - (x/4) = 500 - 0.25x

(a)

0.25x = 500 - p

x = 2,000 - 4p

Slope of this function = dx/dp = -4

It means that for every 1 unit increase (decrease) in price, quantity will decrease (increase) by 4 units.

(b)

When x = 0, p = 500 (Vertical intercept) and when p = 0, x = 2,000 (Horizontal intercept).

In following graph, AB is the demand curve.

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(c)

R = p.x = 500x - 0.25x²

(d)

Total cost (C) = 100.x

Profit = R - C = (500x - 0.25x²) - 100x = 400x - 0.25x²

(e)

When x = 600,

Profit = (400 x 600) - (0.25 x 600 x 600) = 240,000 - 90,000 = 150,000