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    Chapter 4 Homework PDF

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    Phạm Nguyễn Bảo Quyên
    The document discusses the concept of marginal functions and elasticity of demand. It provides calculations to find: 1) The marginal revenue and marginal cost functions given the total revenue function. 2) The price elasticity of demand when 150 units are demanded, which is inelastic. 3) The new price if demand decreases to 140 units based on the inelastic demand. 4) Why the manufacturer should increase price to increase total revenue given inelastic demand at 150 units.

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    Chapter 4 Homework PDF

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    Phạm Nguyễn Bảo Quyên
    34 views6 pages
    The document discusses the concept of marginal functions and elasticity of demand. It provides calculations to find: 1) The marginal revenue and marginal cost functions given the total revenue function. 2) The price elasticity of demand when 150 units are demanded, which is inelastic. 3) The new price if demand decreases to 140 units based on the inelastic demand. 4) Why the manufacturer should increase price to increase total revenue given inelastic demand at 150 units.

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    The document discusses the concept of marginal functions and elasticity of demand. It provides calculations to find: 1) The marginal revenue and marginal cost functions given the total revenue function. 2) The price elasticity of demand when 150 units are demanded, which is inelastic. 3) The new price if demand decreases to 140 units based on the inelastic demand. 4) Why the manufacturer should increase price to increase total revenue given inelastic demand at 150 units.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    34 views6 pages

    Chapter 4 Homework PDF

    Uploaded by

    Phạm Nguyễn Bảo Quyên
    The document discusses the concept of marginal functions and elasticity of demand. It provides calculations to find: 1) The marginal revenue and marginal cost functions given the total revenue function. 2) The price elasticity of demand when 150 units are demanded, which is inelastic. 3) The new price if demand decreases to 140 units based on the inelastic demand. 4) Why the manufacturer should increase price to increase total revenue given inelastic demand at 150 units.

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    of 6

    Application I: Marginal Functions

    (Revenue, Costs and Profit) DO IT !

    9/27/2021 INTERNATIONAL UNIVERSITY, VNU-HCMC, VIETNAM 32


    y) P - 100 -
    4fQ -

    3Q .

    a) TR - P Q
    .

    =
    (100
    -

    4A -
    30 ) .
    Q

    = 100 Q -
    4Qfa -
    305

    b) MR = 100 -
    60,1k -

    GQ

    659
    M
    Reg , 100 6. g
    -
    = -

    = 28

    c) The change in TR when Q increases by 0.25 units

    ATR= MR . IQ f*)TR[ g. zsg -


    TR[gz= 555,78 -
    549
    28 0,25 6,78
    =
    . = -

    =
    7 ( 36,78 ) .

    ↳ compare with the exact change in TRC *)


    Application I: Marginal Functions
    (Revenue, Costs and Profit) DO IT !

    9/27/2021 INTERNATIONAL UNIVERSITY, VNU-HCMC, VIETNAM 33


    3)
    a) TC - AC -
    Q
    c) Level of output when MC - 22 is :
    TC
    100-1/2 -1¥ ) Q It I
    =
    MC =
    5
    TCE 100 t IQ t QI 22=2-1 I
    10
    5
    ME Lt E 100
    ⇒ Q=
    -

    b) MC
    303=2-1 8
    [ =

    The change in TC brought about by a 2 unit increase :

    ATC = MC . AQ

    ATE 8 .
    2

    ATC -- 16
    (a) Find the value of dp/dq when 150 units are demanded.
    (b) Using the result in part (a), determine the point elasticity of
    demand when 150 units are demanded. At this level, is demand elastic,
    inelastic, or of unit elasticity?
    (c) Use the result in part (b) to approximate the price per unit if
    demand decreases from 150 to 140 units.
    (d) If the current demand is 150 units, should the manufacturer
    increase or decrease price in order to increase revenue? (Justify your
    answer.)

    9/27/2021 INTERNATIONAL UNIVERSITY, VNU-HCMC, VIETNAM 40


    d)
    For businesses, there are many advantages to price
    902 Fig inelasticity. For example, they have greater flexibility
    P - 50 ( 151 -
    Q)
    with prices because demand remains basically the
    same, even if prices increase or decrease. If the
    ⇒ dp = 2€19 ( 151 -
    Q)
    business raises its prices up or down, consumers'
    buying habits will remain mostly unchanged. This
    when Q = 150 ⇒ P 50
    { dp
    =
    can impact demand and total revenue for a business
    26 in a couple of different ways.
    =

    First, a business may have less overall revenue. If


    a) data 26 ⇒
    IF =
    Ii
    the price for an inelastic good is decreased and the
    demand for that good does not increase, this would
    result in a decrease in revenue. For this firm, there is
    no beneficial outcome in reducing the price of its
    goods.
    b) Eff dope Ego If Ig
    -

    = .
    = ⇒ inelastic
    demand
    Second, a business may experience more overall
    revenue. If the price for an inelastic good is
    increased and the demand for that good stays the

    c) Ed =
    AQIQ same, the total revenue will increase because the
    quantity demanded has not changed.
    AP f p
    Normally, a price increase does, in fact, lead to a
    -

    101150 decrease in quantity demanded (even if it is small).

    ¥8 =

    AP
    So, businesses that deal with inelastic goods are
    generally able to increase their prices, sell a little
    IP less, and still make higher revenues. They tend to be
    protected against economic downturns and better

    ALL
    able to maximize profits.
    ⇒ =
    -
    5, 2

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