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Math Help - Elasticity of demand

  1. #1
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    Lightbulb Elasticity of demand

    A subway charges 65 cent per person and has 10 000 riders each day. The demand function for the subway is q = 2000(90-q)^1/2

    If the subway company lowers the price to below 65 cents, will it increase the amount of money it takes in from riders?


    help please T_T
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  2. #2
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    Quote Originally Posted by CandyKanro View Post
    A subway charges 65 cent per person and has 10 000 riders each day. The demand function for the subway is q = 2000(90-q)^1/2

    If the subway company lowers the price to below 65 cents, will it increase the amount of money it takes in from riders?


    help please T_T
    The demand function is:

    q = 2000(90-p)^1/2

    where p is the price in cents and q the number of riders per day.

    The question is asking if you lower p does q go up or down.

    Raising p by a small amount makes 90-p smaller so (90-p)^(1/2) is smaller and so q is smaller. Similarly reducing p make 90-p larger and hence q larger.

    CB
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