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# 1.

Q = 2000 2 P

## TR = P *Q = Q (1000 Q/2) = 1000 Q Q2/2

This is important as we can find Marginal revenue only from TR (in terms of Q)

## MR = TR /Q (one unit change in TR because ofa unit change in Q)

Therefore MR = 1000 Q

## MR = 1000 Q = 1000 (2000 2P) = 2P 1000 (in terms of P)

c) what will be the total revenue at a price of \$70? What will be the marginal revenue?

## d) what is the point elasticity at a price of \$70?

Ep = (Q /P)* (P/Q)

when P = 70

## = P/ (2000-2P), therefore P = 500

f) calculate arc elasticity at the interval between \$60 and \$70.

## Therefore Ep = (1880- 1860)/(60-70) * (1880 + 1860)/(60 + 70) = - 0.0695

2. The ABC company manufactures AM/FM clock radios and sells on average 3000 units
monthly at \$25 each to retail stores. Its closest competitor produces a similar type of radio
that sells for \$28.

a) if the demand for ABCs product has an elasticity coefficient of -3, how much will it sell
per month if the price is lowered to \$22.

## Where Ep = -3, Q2 = ?, Q1 = 3000, P2 = 22, P1 = 25, substituting in the arc

elasticity formula above, Q2 = 4421.05 approx 4421

b) the competitor decreases its prices to \$24. It cross-elasticity between the two radios is
0.3, what will be the ABCs monthly sales be?

## Substituting, Qx2 = 4221

3) In the electronic market of Nehru Place, the demand function as analysed by Pankaj
Electronics for its LCD TV sets is P = 12000 6Q. find out,

## a) the marginal revenue function for the same,

TR = P *Q = 12000 Q 6 Q2

MR = TR /Q = 12000 12 Q = 1000 Q
b) at what price and quantity will marginal revenue be zero

## putting MR = 0, Q = 1000, P = 6000

4) In the electronic market of Nehru Place, the demand function as analysed by Pankaj
Electronics for its LCD TV sets is P = 12000 6Q. find out,

## a) what is the point elasticity at a price of \$70,

Ep = (Q /P)* (P/Q)

## For P = 70, Q = 1988

Ep = -1/6*(70/1988) = -0.0058

6(2000 P/6) = P

P = 6000