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Calculating the revenue maximizing price

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If the demand for the Chicago Expressway is: P = 800 - 0.16Q

If P = $2, What is the Quantity Demanded?

At what price quantity point does this demand curve have a price elasticity of -1?

If the goal of the transit authority was to maximize total revenues, what is the new price it should set? Also, what would the total revenue raised in this new price scheme?

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This solution determines the revenue maximization price in the given case.

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If P = $2, What is the Quantity Demanded?
P = 800 - 0.16Q

Put P=$2
2=800-0.16Q
-798=-0.16Q
Q=4987.5

At what price quantity point does this demand curve have a price elasticity of -1?
P = 800 - 0.16Q
On rearranging we ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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