QD = 500 - 2P, where QD is quantity demanded and P is price. a. Find the (QD, P) pair at which...
Question:
QD = 500 - 2P, where QD is quantity demanded and P is price.
a. Find the (QD, P) pair at which the point price elasticity of demand, , is equal to -1. What is the value of total revenue at this point?
b. Where does this (QD, P) pair from part (a) sit on the demand curve? Sketch the demand curve and label the point from part (a)
Unit Elastic Demand:
The unit elastic demand is referred to as a 1% increase in the price of a good or service leads to exactly a decrease of 1% in quantity demanded. This means that the elasticity coefficient with unit elastic demand is equal to -1. The negative sign implies the reverse relationship between the price and quantity. When the demand is unit elastic, the price variation will not affect the total revenue of firms. Research on unit elasticity is important in predicting firms' sales.
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View this answera. Find the (QD, P) pair at which the point price elasticity of demand, , is equal to -1. What is the value of total revenue at this point?
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Unit Elastic in Economics | Definition & Examples
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Chapter 3 / Lesson 7
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Learn the definition of unit elastic in economics. Understand what unit elastic means in terms of supply and demand with the help of graphs and relevant examples.
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