PLEASE COMPLETE ALL QUESTIONS FROM THE DOCUMENT!
The graph below illustrates the inverse demand functions (demand curves) D1 and D2 for which the demand functions are: Q1=12-0.5P1 (D1) and Q2=30-5P2 (D2).
a) Given the current price for P=$4, compute the point elasticity of demand for D1 and D2 and state if each demand is elastic, unit elastic, or inelastic at this price?
3 points
b) Given your computations in part a, how much would the quantity demanded change (as a percent) for each demand curve if the prices increased by 20%?
2 points
c) If the current price is $4 per unit in both markets, and the firm wants to maximize revenue, what price should they be charging in each market? (Motivate)
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Homework Assignment 3
ECON 3125 SP24
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1. The graph below illustrates the inverse demand functions (demand curves) D1 and D2 for which the demand functions are: Q=12-0.5PD1) and Q=30-5PD2)
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20 16
a) Given the current price for P= $4, compute the point elasticity of demand for D1 and D2 and state if each demand is elastic, unit elastic, or inelastic at this price? 3 points
b) Given your computations in part a, how much would the quantity demanded change (as a percent) for each demand curve if the prices increased by 20%? 2 points
c) If the current price is $4 per unit in both markets, and the firm wants to maximize revenue, what price should they be charging in each market? (Motivate) 2 points