Question

2) Assume that we have a diagram with the following info.: P=$15, Qd1=1,000; Py=$10 and Qd2=1,800 Figure out if we are better off with price P1 or P2. Hint calculate the values for: TRI TR2 Moreover, calculate the values for the: L=Lost revenue C=Common revenue G=Gained revenue You will construct a thoroughly accurate diagram that will reflect the above data and your answers.

Answer 1

from the given information

TR1 = P1 * Qd1 = 15 * 1000 = 15000

TR2 = P2 * Qd2 = 10 * 1800 = 18000

We are better of with P2 as it provides with more Qd with less P and the reveune is also more.

lost revenue = TR2 - TR1 = 15000 - 18000 = -3000

common revenue = 15000

gained revenue = 18000 - 15000 = 3000