ECON 3411 Chapter Notes - Chapter 3: Marginal Revenue, Inferior Good, Lincoln Near-Earth Asteroid Research
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Chapter 3: answers to questions and problems: when p = , r = ()(1) = . Thus, the price decrease results in an increase in total revenue, so demand is elastic over this range of prices: when p = , r = ()(5) = . Thus, the price decrease results in an decrease total revenue, so demand is inelastic over this range of prices: recall that total revenue is maximized at the point where demand is unitary elastic. We also know that marginal revenue is zero at this point. For a linear demand curve, marginal revenue lies halfway between the demand curve and the vertical axis. In this case, marginal revenue is a line starting at a price of and intersecting the quantity axis at a value of q = 3. 5. 3. 5 units, which corresponds to a price of as shown below. Figure 3-1: at the given prices, quantity demanded is 750 units:
