The price elasticity of demand (PED) for a good with price P and a quantity sold...

 

Transcribed Image Text:

The price elasticity of demand (PED) for a good with price P and a quantity sold Q is defined by the equation: PED= Q/Q / P (a) [2%] Find the PED (as a function of Q, a and b) for the demand equation P=a-bQ, where a and b are positive parameters. (b) [2%] Find the value of Q*, as a function of a and b, at which total revenue is maximised. [Hint: maximise TR = PQ = (a - bQ)Q]. (c) [2%] Find the value of P*, as a function of a and b, at which total revenue is maximised. [Hint: use your answer from (b)]. (d) [2% ] Prove that the PED for the demand function P = a-bQ equals minus one at the point where total revenue is maximised. (e) [2%] Using your answer in (b), (c) and (d), sketch the demand function with P on the vertical axis, giving the vertical intercept and the slope. Also label the points Q* and P* with their respective values and the point at which the PED = -1. The price elasticity of demand (PED) for a good with price P and a quantity sold Q is defined by the equation: PED= Q/Q / P (a) [2%] Find the PED (as a function of Q, a and b) for the demand equation P=a-bQ, where a and b are positive parameters. (b) [2%] Find the value of Q*, as a function of a and b, at which total revenue is maximised. [Hint: maximise TR = PQ = (a - bQ)Q]. (c) [2%] Find the value of P*, as a function of a and b, at which total revenue is maximised. [Hint: use your answer from (b)]. (d) [2% ] Prove that the PED for the demand function P = a-bQ equals minus one at the point where total revenue is maximised. (e) [2%] Using your answer in (b), (c) and (d), sketch the demand function with P on the vertical axis, giving the vertical intercept and the slope. Also label the points Q* and P* with their respective values and the point at which the PED = -1.

Answer rating: 100% (QA)

Solution for Price Elasticity of Demand PED a PED for PabQ We are given the general PED formula PED Q Q P P 1 We are asked to find the PED for the dem... View the full answer