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    Inverse, Direct Demand Function, and Point Price Elasticity

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    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.

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    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.

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