Consumer elasticity
Instructions:
In this activity you will solve exercises related to the subject of the elasticity of the consumer.
Analyze: After a study done by some consultants, it was determined that the equation of demand for the product sold by the company XYZ, Inc. is as follows:
Q = 100-5 P
Determine the number of units (Q) you can sell if you set a price (P) of $ 7.00
If you want to sell 40 units, what price (P) should you charge?
What would be the highest price (P) that someone would be willing to pay for the product.
Determine the elasticity of demand (Ed) when the price changes from $ 8.00 to $ 9.00.
Determine the elasticity of demand (Ed) when the price (P) is $ 9.00.
Should the company charge a price higher or lower than $ 9.00 for your product? Why?
Determine the amount to be sold (Q) and the price to be charged (P) so that the company can maximize its Total Income (IT)?
Show that the price elasticity of demand equals -1.00, when the firm is maximizing its total revenue (ITmax).
You must show all the computations associated with these exercises to obtain the corresponding credit.
Your work must be original and should not contain material copied from books or the Internet.