The marketing department of XYZ corporation, Inc. has estimated the following inverse demand function for its popular product by:P=50 -1/2Q, whereQis the quantity of the product per year (sold in thousand units) andpthe price per unit.

[Itmightbe helpful to first read "Inside Business 3-2:Calculating and Using the Arc Elasticity: An Application to the Housing Market" from your textbook].

1. Determine the price-elasticity when the price varies from p1=$20 to p2=$25.

2. How would you interpret the value of elasticity determined in question 1?

3. Given that the inverse demand isP=50 -1/2Q, find the marginal revenue MR.

4. Using Excel or a calculator, fill-in the columns Price (p), Quantity (Q),point-price elasticity?, Absolute value of Elasticity?, Type of elasticity (Elastic, Unit-Elastic, Inelastic), Total Revenue(TR=pQ)and marginal revenue (MR) for each price level,p=$5,10,15, ... ,,45,50(in $5 dollar increment).

Absolute value MR Price (P) Quantity (Q) Elasticity Type of of Elasticity Elasticity TR $5 $50