Compute point price elasticity of demand

Reference no: EM1376302

a) Run OLS to estimate the inverse demand function (P = f(Q)); determine how much confidence do you have in this estimated equation? Apply algebra to then find the direct demand function (Q = f(P)).
b) What is the point price elasticity of demand when P=$42? How would you characterize demand when the price is around $42?
c) What is the point price elasticity of demand when P=$24? How would you characterize demand when the price is around $24?
d) To maximize total revenue, what would you recommend if the company was currently charging P=$42? If it was charging P=$24?
e) Determine an equation for MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis.
P Q
$44 642
$42 1,108
$26 2,932
$24 3,465
$15 4,007
$10 4,821

Reference no: EM1376302

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