HW: 10152012 (PART A)

Q1. PR-Corporation: $500 each unit, 6000 units/mth
       Competitor: $450 each unit
       Problem: Cuts PR-C's sale volume from 6000 to 4500

a. What is the arc price elasticity of demand between Potomac's oven and the competitor?

     4500 - 6000               -1500  =    $1050    
   4500   + 6000    =       -$150        10500   = 0.1 ~ 1.00(arce)
      $450 - $600                    
      $450 +$600         

b. Unit Elastic. Loss of sales may be a direct onsequence of decrease in consumer income.
c. -3.0 = 4500 - 6000  
               4500 + 6000 =      X = 454.54
               $X - $600
               $X +$600


Q2. -2.2 = .20 * X --> .20 * -2.2 = -44 --> take absolute value of -44. This leads to a percentage increase in the quantity of computers sold will be 44%

Q3.     1800 - 1500
        (1800 +1500)/2  =  300  *   2     = .001
          2.25 - 1.75            .50     1650
       (2.25 + 1.75)/2

Q7. 15 = (P) (1 + (1/1.2)) = 15 = (P)(.167) = 90, because 15/.167 equals 90 and 90 * .167 equals the
       marginal revenue.
Q8.