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Calculating quantity demanded & own price elasticity

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A radio station that goes by the name KRDY-FM is contemplating a T shirt advertising promotion. Monthly sales data from T shirt shops marketing the "Listen to KRDY-FM" design indicate that the demand curve for the T-shirts can be described as:

Q = 3,000 - 500P

Where: Q is T shirt sales and P is price.

a.How many T-shirts could KRDY-FM sell at $4 each?
b.What price would KRDY-FM have to charge to sell 2,000 T shirts?
c.Calculate the own price elasticity of demand at a price of $4.
d.What is the inverse demand curve for the radio station?

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Solution Summary

Solution describes the steps to calculate quantity demanded for a given price and own price elasticity of demand. It also derives inverse demand curve.

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a. How many T-shirts could KRDY-FM sell at $4 each?
Q=3000-500P
Let us find demand at P=$4
Q=3000-500*4=1000 units

b. What price would KRDY-FM have to charge to sell 2,000 T shirts?
Q=3000-500P
Put Q=2000 and solve ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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