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Unformatted text preview: . 5. Similarly, the following also imply one another: | η | > 1 , η <-1 , demand is elastic, usually price is high and demand is low. When price is raised a little, demand drops by a relatively larger proportion (so demand is elastic), resulting in lower revenue . 6. Because of the reasoning given in notes 4 and 5, we see that the revenue R is (usually) maximized (or in some cases, minimized) when demand is unit elastic ( η =-1 or | η | = 1). In some situations, it is easier to use this property to determine when revenue is maximized. We shall see in class that dR dx = 0 i± | η | = 1. Example . The following diagrams give the graphs of revenue R and the price elasticity of demand η , respectively, against price p . Here, the demand equation is p =-. 05 x + 50, with (after some calculus) R = 20 p (50-p ) , η =-p 50-p ....
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This note was uploaded on 01/02/2012 for the course MAC 2233 taught by Professor Danielyan during the Fall '08 term at University of South Florida.
- Fall '08