# Price Elasticity Calculations

Demand for a managerial economics text is given by Q=20,000-300P. The book is initially priced at $30.00.

a. Compute the point price elasticity of demand at P=$30

b. If the objective is to increase total revenue, should the price be increased or decreased? Explain.

c. Compute the arc price elasticity for a price decrease from $30 to $20.

d. Compute the arc price elasticity of a price decrease from $20 to $15.

Write the demand equation for which the price elasticity of demand is zero for all prices.

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#### Solution Preview

Answer (a):

At P = 30,

Q = 20,000 - 300x30 = 11,000

Elasticity = -300x(30/11,000) = -0.8181

Answer (b):

The demand in inelastic. So to increase total revenue, the ...

#### Solution Summary

The question determines the demand equation for which the price elasticity of demand is zero for all prices.