OPTIMAL PRICING
The table below shows the hypothetical prices and quantities demanded of a software product. Assume that the fixed cost of setting up the production of software is $200 and the marginal cost is $5.
Fill out the table by calculating the revenue, the marginal revenue, the marginal cost, and the profit.
Give a general definition of price elasticity of demand. Explain the factors that make the demand of the product more elastic.
Calculate the own price elasticity of increasing the price from $0 to $5, from $5 to $10, etc., from $35 to $40. In which price region is the demand for the product elastic and in which region is it inelastic?
Conduct a stay even analysis by calculating the critical loss from increasing the price from $30 to $35. How much business can the software company afford to lose by increasing the price in order to maintain its profit?
Price ($)
Quantity sold
Revenue
MR
MC
Profit
Elasticity
40
0
35
10
30
20
25
30
20
40
15
50
10
60
5
70
0
80
OPTIMAL PRICING
The table below shows the hypothetical prices and quantities demanded of a software product. Assume that the fixed cost of setting up the production of software is $200 and the marginal cost is $5.
Fill out the table by calculating the revenue, the marginal revenue, the marginal cost, and the profit.
Give a general definition of price elasticity of demand. Explain the factors that make the demand of the product more elastic.
Calculate the own price elasticity of increasing the price from $0 to $5, from $5 to $10, etc., from $35 to $40. In which price region is the demand for the product elastic and in which region is it inelastic?
Conduct a stay even analysis by calculating the critical loss from increasing the price from $30 to $35. How much business can the software company afford to lose by increasing the price in order to maintain its profit?
| Price ($) | Quantity sold | Revenue | MR | MC | Profit | Elasticity |
| 40 | 0 | |||||
| 35 | 10 | |||||
| 30 | 20 | |||||
| 25 | 30 | |||||
| 20 | 40 | |||||
| 15 | 50 | |||||
| 10 | 60 | |||||
| 5 | 70 | |||||
| 0 | 80 |
Related textbook solutions
Related questions
Use the following demand schedule for a monopolist to calculate total revenue and marginal revenue. For each price, indicate whether demand is elastic, unit elastic, or inelastic. Using the data from the demand schedule, graph the demand curve, the marginal revenue curve, and the total revenue curve. Identify the elastic, unit elastic, and inelastic segments along the demand curve.
| Price (P) | Quantity Demanded (Q) | Total Revenue | Marginal Revenue | Price elasticity of demandĀ |
| $5.00 | 0 | Ā | Ā | Ā |
| 4.50 | 1 | Ā | Ā | Ā |
| 4.00 | 2 | Ā | Ā | Ā |
| 3.50 | 3 | Ā | Ā | Ā |
| 3.00 | 4 | Ā | Ā | Ā |
| 2.50 | 5 | Ā | Ā | Ā |
| 2.00 | 6 | Ā | Ā | Ā |
| 1.50 | 7 | Ā | Ā | Ā |
| 1.00 | 8 | Ā | Ā | Ā |
| 0.50 | 9 | Ā | Ā | Ā |
| 0 | 10 | Ā | Ā | Ā |
Use the following demand schedule for a monopolist to calculate total revenue and marginal revenue. For each price, indicate whether demand is elastic, unit elastic, or inelastic. Using the data from the demand schedule, graph the demand curve, the marginal revenue curve, and the total revenue curve. Identify the elastic, unit elastic, and inelastic segments along the demand curve.
| Price (P) | Quantity Demanded (Q) | Total Revenue | Marginal Revenue | Price elasticity of demandĀ |
| $5.00 | 0 | Ā | Ā | Ā |
| 4.50 | 1 | Ā | Ā | Ā |
| 4.00 | 2 | Ā | Ā | Ā |
| 3.50 | 3 | Ā | Ā | Ā |
| 3.00 | 4 | Ā | Ā | Ā |
| 2.50 | 5 | Ā | Ā | Ā |
| 2.00 | 6 | Ā | Ā | Ā |
| 1.50 | 7 | Ā | Ā | Ā |
| 1.00 | 8 | Ā | Ā | Ā |
| 0.50 | 9 | Ā | Ā | Ā |
| 0 | 10 | Ā | Ā | Ā |
Use the following demand schedule for a monopolist to calculate total revenue and marginal revenue. For each price, indicate whether the demand is elastic, unit elastistic or inelastic. Using the data from the demand schedule,graph the demand curve, the marginal revenue curve and the total revenue curve. Identify the elastic, unit elastic and inelastic segments along the demand curve.
| Price(P) | Quantitiy demanded (Q) | Total Renenue (TR) | Marginal Revenue (MR) | Price elasticity of demand  |
| 5 | 0 | Ā | Ā | Ā |
| 4.5 | 1 | Ā | Ā | Ā |
| 4 | 2 | Ā | Ā | Ā |
| 3.5 | 3 | Ā | Ā | Ā |
| 3 | 4 | Ā | Ā | Ā |
| 2.5 | 5 | Ā | Ā | Ā |
| 2 | 6 | Ā | Ā | Ā |
| 1.5 | 7 | Ā | Ā | Ā |
| 1 | 8 | Ā | Ā | Ā |
| 0.5 | 9 | Ā | Ā | Ā |
| 0 | 10 | Ā | Ā | Ā |
