1. Let an inverse demand function be defined by:p = aq + b with a< 0 and b>0 $. Show that when demand has a price elasticity equal to - 1, total revenue reaches its maximum.
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Mathematically, it can be expressed as: $$E_d = \frac{\%\Delta Q}{\%\Delta P} = \frac{\frac{\Delta Q}{Q}}{\frac{\Delta P}{P}} = \frac{\Delta Q}{\Delta P} \cdot \frac{P}{Q}$$ Show more…
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