The recent economic expansion in Cyprus has led to higher sales for most businesses. Mario

Trading sells taplet cases and its demand for the product is expressed through the demand

equation Qd = 100 - 2P (inverse demand P = 50 - 0.5Q). Mario trading is debating whether to

raise the price in order to take advantage of the higher demand, caused by the higher income of

consumers, as a result of the economic expansion. The taplet cases are currently selling for $20.

Please answer the following questions.

1.

Calculate the price elasticity of demand when the price is $20 and explain what it means?

Based on the elasticity value, what should the business do in order to increase its

revenue? Explain!

2.

Calculate the marginal revenue (from the taplet cases) of the business when it sells its

30 unit. Is revenue maximised at that quantity? What is the selling price at Q=30?

Explain!

3.

If the cost of the product is constant at $16, how many units should the business sell and

at what price, in order to maximize its profits? Explain your work! (ignore all other

expenses)