The demand equation for a certain product is given by p =18e^−0.002q ,
where p is
the price in dollars and q is the quantity in units.
a) Find the elasticity of demand when 1000 units are produced.
b) Interpret your result from part a) by analyzing the revenue when the unit price
Can someone help get me started please? I'm quite unsure about how to do this, thanks!
Responsiveness of the demand for a good or service to the increase or decrease in its price. Normally, sales increase with drop in prices and decrease with rise in prices. As a general rule, appliances, cars, confectionary and other non-essentials show elasticity of demand whereas most necessities (food, medicine, basic clothing) show inelasticity of demand (do not sell significantly more or less with changes in price).
lol I just dont know how to solve p =18e^−0.002q..
sorry ... I'm not an economist, so that entire paragraph definition is Greek to me. the question wants to know what elasticity of demand is for q = 1000
do you happen to have a formula to calculate this?
solve for what?lol I just dont know how to solve p =18e^−0.002q..
Actually, since quantity in your case is expressed with , and not , elasticity of demand is as follows:
You are given a function which is in terms of . So after differentiating, simply substitute the derivative and your function into the elasticity definition above to arrive at an expression in terms of only .
I hope that this helps.