Calculate total revenue from sales in market

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Reference no: EM132410697

Problem:

Suppose that the demand for Cod Liver Oil (CLO) can be written QD =5000-2P (so, the inverse demand curve for CLO is P=2500-0.5QD), where P is the price per ton (in dollars) of CLO and QD is the quantity demanded (in tons) in a period.

a) Calculate price elasticity of demand (using the point elasticity formula) at the following amounts of CLO along this demand curve: QD=4000, QD =2500, QD =1000.

b) Calculate total revenue from sales in this market at QD =2500. Show your work please.

d) Assume that demand will decrease based on a parallel shift of the demand curve. Explain what will happen to elasticity at QD=2500 (will it increase or decrease and why?). What will happen to total revenue at this quantity (will it increase or decrease and why?). Will the maximum total revenue for the market be achieved at a greater or a smaller quantity than QD=2500?

Reference no: EM132410697

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