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2 Feb 2018

(b) Use the elasticity of demand to calculate the marginal revenue at the current price of $100. Simplify your answer to "calculator ready".

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5 Feb 2018
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4. (10 marks) Opad, the blockbuster product of Opple Inc., has a weekly demand q that declines with price p according to q = 1000 e-p/200 (a) Find the elasticity of demand e at the current price of $100. (b) Use the elasticity of demand to calculate the marginal revenue at the current price of $100. Simplify your answer to "calculator ready". (c) If the price is raised by 1%, use the elasticity to estimate the percentage decline in sales.

(c) If the price is $12 and increases by 4%, what is the percentage change in demand? (Hint: Use the price elasticity of demand to answer this question.) You may leave your answer in the simplest calculator-ready form you can find.

(c) A tailor is currently producing 80 suits per month and sells them for $100 per suit. His monthly demand curve is given by q = 100 – 2/p. Find the current price elasticity of demand and use it to decide whether price should be raised or lowered to increase his revenue.

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