The demand function for a product is $Q = 500 - 5P + 0.02P^{2}$, where $P$ is the price in naira and $Q$ is quantity demanded. (i) Compute the price elasticity of demand at $P = 20$. (ii) If the price is increased by 5 %, will total revenue rise or fall?

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Accepted Answer

elasticity ≈ -0.21; revenue will increase

Neco Model Questions Vol1 2019 Economics Question 48

The demand function for a product is \(Q = 500 - 5P + 0.02P^{2}\), where \(P\) is the price in naira and \(Q\) is quantity demanded. (i) Compute the price elasticity of demand at \(P = 20\). (ii) If the price is increased by 5 %, will total revenue rise or fall?

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Neco Model Questions Vol1 2019 Economics Question 48

The demand function for a product is \(Q = 500 - 5P + 0.02P^{2}\), where \(P\) is the price in naira and \(Q\) is quantity demanded. (i) Compute the price elasticity of demand at \(P = 20\). (ii) If the price is increased by 5 %, will total revenue rise or fall?

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About This Question

Master the Exam!

The demand function for a product is \(Q = 500 - 5P + 0.02P^{2}\), where \(P\) is the price in naira and \(Q\) is quantity demanded. (i) Compute the price elasticity of demand at \(P = 20\). (ii) If the price is increased by 5 %, will total revenue rise or fall?