Question

Given a demand curve of Q=100−4P: 1st attempt Part 1 (1 point)See Hint Calculate the price at which demand is unit elastic. This price is $ . (Round your answer to two decimal places.)

Part 2 (1 point)See Hint Find the quantity where demand is unit elastic. This quantity is 25 units . (Round your answer to two decimal places.)

Part 3 (1 point)See Hint At quantities lower than the value found in Part 2, the demand curve is Choose one: A. perfectly inelastic. B. relatively elastic. C. relatively inelastic. D. perfectly elastic.

Part 4 (1 point)See Hint At quantities higher than the value found in Part 2, the demand curve is Choose one: A. perfectly inelastic. B. relatively elastic. C. perfectly elastic. D. relatively inelastic.

Answer 1

Given a demand curve of Q=100−4P: Calculate the price at which demand is unit elastic.

When demand is unit elastic, ed = 1

ed = dQ/dP * P/Q

-1 = -4 * P/Q

0.25Q = P

0.25*100 - 0.25*4P = P

25 = 2P

P = 12.5

Hence the price is $12.5

Part 2 The quantity where demand is unit elastic is 100 - 4*12.5 = 50 units

Part 3 At quantities lower than the value found in Part 2, the demand curve is B. relatively elastic

Part 4 At quantities higher than the value found in Part 2, the demand curve is D. relatively inelastic.

Below this is because along the demand function the elasticity continues to decline in value which means for earlier quantities the demand elasticity is very high and for higher quantities demand elasticity is very low