The Jaimison Company produces steel. Its demand curve is linear. Its current price and quantity are $237.50 and 1,050 tons, respectively. Management determines that if they lower the price to $200, the will sell 1,200 tons of steel.

a. Calculate the arc price elasticity between these two points on the demand curve.

b. Should management lower the price? Explain

C. Use the information in the problem to derive the equation for Jamison's demand curve equation (i.e., the "inverse" demand curve).

d. Find the price that maximizes total revenue. What is the elasticity of demand at this point? What is the total revenue?

e. Jamison's marginal costs are $100 per ton. Find Jamison's profit maximizing output and price.

Please see the attached file for complete solution. Work done with the help of equation writer may not print here.

a. Calculate the arc price elasticity between these two points on the demand curve.

Arc Elasticity is given by

-negative sign indicates that demand has a negative slope

b. Should management lower the price? Explain

We are not given any information about ...

Solution Summary

Solution describes the steps to find point and arc elasticities. Demand function is derived from given information. Quantities for maximum profit and revenue are worked out using calculus.

... b. Calculate arc elasticity at the interval between P = 5 and P = 6. c. At which price would a change in price ...Point and Arc Elasticities are calculated. ...

Managerial Economics. 1. Demand Analysis. ... B. Calculate the optimal price for Papa burgers if marginal cost is $1 per unit. 3. Arc Price Elasticity. ...

... So when we're calculating Price Elasticity of Demand we ... in Price) However how we calculate the percentage ... Before when we calculated Price Elasticity of Demand ...

... D. Why might the true arc advertising elasticity differ from that calculated in Part C ... Q=5000-160*25=1000 B. Calculate the point price elasticity of ...

... 2. Calculate point price elasticity of demand for this product. 3. Assuming the same arc price elasticity of demand calculated in Part A, determine the further ...

... curves identical to Mr. Smith's, what will be the point and arc elasticity for the ... a. Calculate the arc price elasticity of demand for the pizza rolls. ...

Calculating Arc Elasticity of Demand and Optimal Price. ... A. Calculate the arc price elasticity of demand for ... B. Assume that the arc price elasticity (from Part A ...

... in the price elasticity of demand, calculate EZ's arc... advertising elasticity differ from that calculated in part ... When we use arc elasticities we do not need to ...