# Inverse, Direct Demand Function, and Point Price Elasticity

Inverse, Direct Demand Function, & Point Price Elasticity

Copy and paste the following data into Excel:

a) Run OLS to determine the inverse demand function (P = f(Q)); how much confidence do you have in this estimated equation? Use algebra to then find the direct demand function (Q = f(P)).

b) What is the point price elasticity of demand when P=$42? How would you characterize demand when the price is around $42?

c) What is the point price elasticity of demand when P=$24? How would you characterize demand when the price is around $24?

d) To maximize total revenue, what would you recommend if the company was currently charging P=$42? If it was charging P=$24?

e) Determine an equation for MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis.

P Q

$44 642

$42 1,108

$26 2,932

$24 3,465

$15 4,007

$10 4,821.

https://brainmass.com/economics/demand-supply/inverse-direct-demand-function-point-price-elasticity-625020

#### Solution Summary

Solving a problem for inverse, direct demand function, & point price elasticity.