Using the following demand schedule, calculate total revenue, marginal revenue and own-price elasticity of demand. Then show the relation among marginal revenue, price and elasticity of demand.
Quantity Marginal Elasticity
Price Demanded Revenue Of Demand
The first two columns in the following table give a firm's short run production function when the only variable input is labor, and capital (the fixed input) is held constant at 5 units. The price of capital is $2,000 per unit, and the price on labor is $500 per unit.
Units Units COST
of of Average Marginal Fixed Variable Total
Labor Output product product
AVERAGE COST Marginal
Fixed Variable Total cost
a. Complete the table
b. What is the relation between average variable cost and marginal cost? Between erage total cost and marginal cost?
c. What is the relation between average product and average variable cost? Between marginal product and marginal cost?
1) Please refer to the attached calculation table.
Here, I'd like to explain in detail the Own-Price Elasticity of Demand
a.The Definition: Price elasticity of demand - a measure of responsiveness of quantity demanded to changes in price.
Price Elasticity of Demand = Percentage Change in Quantity Demand (Sales)/ Percentage Change in Price
b. The own-price elasticity of demand will always be negative, because if price increases, quantity demand will fall; and if price decreases, quantity demand will increase. In other words, one factor in this ratio will always be negative, so the ratio will always be negative.
c. Calculating the Price Elasticity of Demand
The point formula: ...
The solution does a great job of explaining the concepts being asked in the question. The attachment shows all the calculations related to the first question. The posting then answers the demand elasticity question in detail. Marginal Product and marginal cost calculations are shown in detail as well. The response explains the concepts very well and in detail. It is ideal for students looking to get a detailed understanding of the topic. Overall, an excellent response.