Let q = f(p) be the demand for a product when the price is p. For a given price p, the price elasticity E of the product is defined by

If the change in price (∆p) is small, this formula reduces to

a Would you expect f(p) to be positive or negative?

b Show that if E<−1, a small decrease in price will increase the firm’s total revenue (in this case, we say that demand is elastic).

c Show that if −1 

Transcribed Image Text:

percentage change in demand E = percentage change in price percentage change in demand E = percentage change in price

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This is the mathematical expression which measure the relationship be... View the full answer