Answer:
a. Ped = - p /q
b. Ped at p = 89 : 0.35 (Inelastic Demand)
c. Total Revenue maximising price = 173
Step-by-step explanation:
a. Price Elasticity of Demand is responsiveness in demand due to price change. Ped = [∂q / ∂p] x [p / q]
Demand Function Given : q = 346 - p
Derivating q with respect to p : ∂q / ∂p = -1
Putting value of ∂q / ∂p in Formula :
P Ed = -1 x p/ q
Price Elasticity of demand = -p / q
b. Elasticity at p = 89
Putting p value in elasticity, q value from demand function :
= 89 / (346-89) = 89 / 257
= 0.35
Since Price Elasticity of Demand < 1 , Demand is Inelastic.
c. Total Revenue is maximum when demand is unitary elastic, price elasticity of demand = 1
Ped = -p / q = 1
Putting value of q : - p / (346 - p) = 1
- p = 346 - p → p + p = 346
2p = 346 → p = 173
