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3 weeks ago Edited: 3 weeks ago, bio_man
Given the demand function D(p) = 275 — 4p2
Find the Elasticity of Demand at a price of $8

At this price, we would say the demand is:

Unitary

Elastic

Inelastic

Based on this, to increase revenue we should:
 
Raise Prices
 
Keep Prices Unchanged
 
Lower Prices
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3 weeks ago
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The Price Elasticity of Demand is a measure of the strength of the change in the demand when prices are changed. Its function can be found from the demand function as shown below. It can be studied to find the prices at which revenue decreases and increases with changes in price.

D(p) = 275 — 4p2

To find the price of elasticity function, take the derivative of this function first.

D'(p) = -8(p)

Then multiply it by p over the original function.

\(PED=\left|D'\left(p\right)\cdot \frac{p}{D\left(p\right)}\right|\)

\(PED=\left|-8p\cdot \frac{p}{275-4p^2}\right|=-\frac{8p^2}{275-4p^2}\)

Then, substitute $8 into p

\(PED=\left|-\frac{8\left(8\right)^2}{275-4\left(8\right)^2}\right|=\left|-26.95\right|=+26.95\)



Price is elastic, because it's greater than 1.

The speed at which the demand is changing is greater than the percentage change in price.

Based on this, to increase revenue we should raise prices.
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3 weeks ago
Marked this solved, if you have any questions, please let me know
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