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2. A vacuum cleaner seller faces a demand function given by P = 200 0.2Q, where Q is the number of vacuum cleaners sold, and

2. A vacuum cleaner seller faces a demand function given by P = 200 0.2Q, where Q is the number of vacuum cleaners sold, and P is the price of a vacuum cleaner (in $).

  1. (10 marks) At the current price of a vacuum cleaner, the price elasticity of demand for vacuum cleaners is -3. Given this information, find the current price of a vacuum cleaner. How many units of vacuum cleaners are sold?
  2. (10 marks) If the seller wants to increase the revenue, should she increase or decrease the price of a vacuum cleaner? (Do not provide any calculation. Explain your answer in words.)

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