Using the information in Solved Problem 11.2, calculate the elasticity of demand for the iPad at the
Question:
Using the information in Solved Problem 11.2, calculate the elasticity of demand for the iPad at the profit-maximizing solution using its inverse demand curve. Also calculate the inverse demand curve using the Lerner Index method in Solved Problem 11.3.
Data From Solved Problem 11.2:-
When the iPad was introduced, Apple's constant marginal cost of producing its top-of-the-line iPad was about \(\$ 220\), its fixed cost was \(\$ 2,000\) million ( \(\$ 2\) billion), and we estimate that its inverse demand function was \(p=770-11 Q\), where \(Q\) is the millions of iPads purchased. \({ }^{9}\) What were Apple's average variable cost and average cost functions? What was its marginal revenue function? What were its profit-maximizing price and quantity? What was its profit? Show Apple's profit maximizing solution in a figure.
Data From Solved Problem 11.3:-
In 2016, Microsoft's Surface Pro 4 laptop and tablet sold for \$735. Its marginal cost was about \(\$ 470 .{ }^{15}\) What was its Lerner Index? If it was operating at the shortrun profit-maximizing level, what was the elasticity of demand for the Surface Pro?
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