Explore BrainMass
Share

# Inverse, Direct Demand Function, and Point Price Elasticity

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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.