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Calculate the point price elasticity of demand for the firms

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Reference no: EM13303490

1. The estimated demand curve for a firm’s product is represented by the equation:

where  is the quantity sold per year and   is the price per unit.

     (a) Based on the estimated demand curve, write the equations for Solis’

(i) total revenue

(ii) average revenue

(iii) marginal revenue

     (b) What is the maximum total revenue per year that the firm can obtain from sales of its product? (Give the exact dollar amount and show how you determined it.)

     (c) Calculate the point price elasticity of demand for the firms’ product when . Is the demand elastic or inelastic at that quantity? How do you know?

2. Wonder bread is a normal good produced by the Wonder Bakery. Using clearly labeled Demand and Supply curves, show what will happen to the equilibrium price and quantity of Wonder bread in each of the following situations?

(a) Due to a recession, households that buy Wonder bread experience a decrease in income.

(b) The cost of wheat used in Wonder bread increases significantly.

(c) Wonder Bakery buys improved ovens that reduce the costs of Wonder bread.

(d) Lovely Loaf, a rival, cuts the price of its bread.

(e) Consumers become health conscious and switch to low-calorie breads.

(f) Situations (a) and (b) occur at the same time.


Attachment:- 622700_1_Homework.docx

Reference no: EM13303490

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