{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

53-Maths_behind_PED

53-Maths_behind_PED - along a linear demand curve 4 Total...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
The mathematics of price elasticity of demand 1. Show how formula a, given below, for price elasticity of demand can also be written in the form shown in formula b Formula a Formula b PED = % q PED = p q % P q p 2. a) A linear demand curve can be expressed in the form q = a – bp . Using first principles of calculus from mathematics, we know that the slope of that demand function can be written as q/ p. Give another way in which the slope of the demand function can be expressed, using the information given about the equation of the demand function. b) Using the information from question 1 and question 2a, show how the PED can be expressed in the form shown below: -bp _ a – bp 3. Explain how the formula given in question 2b can be used to show that PED varies
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: along a linear demand curve. 4. Total revenue can be calculated using the formula R = pq. Assume that in a particular market with a linear demand curve, a change in price is given as p + ∆ p and the associated change in quantity is given as q + ∆ q. a) Write down a formula for the new level of total revenue, R new b) Write down a formula for calculating the change in total revenue as a result of the change in price c) Write down a formula for calculating the rate of change in revenue per change in price. d) Explain how you can use this formula to demonstrate how total revenue changes as price changes along a linear demand curve...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern