Compute the elasticity of demand and the price quantity pair (8, 4000) using cal

Question

Compute the elasticity of demand and the price quantity pair (8, 4000) using calculus. c. d. Whatis the percentage change in TR due to the price increase from $8 to $8.04 How closely does this match the product rule for percentage changess proximation? (MR and Elasticity Again video 4) 2) A profit maximizing firm sells its goods at a price of $40 a piece. At the profit maximizing value for production, marginal cost $10. For this firm, what is the elasticity of demand when P 40? 3) What was the elasticity of demand for the profit maximizing firm that we studied ir Problem set #1, question #2? get Constraints ose a consumer has $200 in income and purchases 2 ite of a shirt is $10 per shirt and the-price of a pair of pants is $20 per pair of pants. Putting shirts on the-vertical axis and pants on the horizontal axis, draw this een budget constraint. What is the equation that describes this consumer's budget c and pants. Suppo

Explanation / Answer

(2)

Lerner Index (LI) = (Price - Marginal cost) / Price

= $(40 - 10) / $40

= $30/$40

= 3/4

Again,

LI = -1 / E, where E: Elasticity of demand

3/4 = - 1/E

-E = 4/3

E = -4/3 = -1.33

(NOTE: For problem 3, data from previous question is missing)

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