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Calculate viewer elasticity

Demand for advertising is given by: Qd = 30 - 0.0002P + 26V

Qd = quantity demanded
P = price per minute
V = number of viewers

All costs are fixed and the goal is to maximize total revenue. Suppose that the number of viewers is 1 million.

What price should you charge?
How many minutes of advertising to sell?
What is total revenue?

Suppose price is held constant. What will happen to the quantity demanded if due to PVR the number expected viewers falls to 0.5 million? Calculate viewer elasticity based on the two points and explain in words what this value means.

Solution Preview

I think the V is number of viewers in millions. Please check, I am doing the calculations with this, if it is different please make suitables changes in calculations, as know the process.

V= 1 million
Thus, Qd=30-0.0002P+26*1 = 56-0.0002P
Reversing the equation we have
0.0002P = 56-Qd
P=280,000 - 5000Qd
Total Revenues (TR) = P*Qd = ...

Solution Summary

Demand for advertising is explored in this case.