Question

(a) Suppose the demand for cellular phone network access in Malaysia is given by Qd=500.5P, where Qd is the number of subscribers (in millions) and P is the monthly fee (in RM). Calculate the price elasticity of demand at the current price of RM40. How will the total revenue of the network provider change if it increases the monthly fee to RM50?(10 marks)

(b) What are the implications of price elasticity of demand for pricing and revenue decisions? Calculate the price elasticity of demand for rubber in Malaysia, given that the price of rubber increased from RM 5 to RM 6 per kg and the quantity demanded decreased from 500 to 400 tonnes between February and March 2021. Is the demand elastic, inelastic, or unit elastic?

Question

(a) The demand for petrol rises from 500 to 600 Barrels when the price of a particular scooter is reduced from RM 2500 to RM 2200. Find out the cross elasticity of demand for the two. What is the nature of their relationship?(5 marks0

(b) A company has the following demand equation. Q = 1000 - 3000 P + 10 A Q = Quantity demanded P = Product Price A = Advertisement expenditure Assume that P = 3 and A = 2000 I Suppose the firm drops the price to RM 2.50 would this be beneficial. Ii Suppose the firm raises the price to RM 4.00 while increasing. Its advertisement expenditure by 100 would this be beneficial? Explain(10 marks)