Question: Suppose the demand (in thousands) for a toaster is given by 100p 2 , where p is the price in dollars charged for the toaster.

Suppose the demand (in thousands) for a toaster is given by 100p^–2, where p is the price in dollars charged for the toaster.

a. If the variable cost of producing a toaster is $10, what price maximizes profit?

b. The elasticity of demand is defined as the percentage change in demand created by a 1% change in price. Using a data table, show that the demand for toasters has constant elasticity, that is, the elasticity doesn’t depend on the price. Would this be true if the demand for toasters were linear in price?

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