Question

1. Awesome Apples Orchard sells tree fruit at farm markets. Based on their years of sales experience, the owners have mapped the demand for apples in the table below, where Price is in $/box (2 lbs) and Quantity refers to boxes of apples sold daily. In particular, they have learned that the Demand for Apples (holding constant other factors) takes the form:

QAd= 400 - 40PA

1. For your marketing analysis, please complete the table below. Use the point elasticity formula and calculate marginal revenue with respect to change in price. For Marginal Revenue), ∆Q/∆P, and P/Q, please compute changes between the row above and the current row. (The ∆Q/∆P and P/Q columns are for your convenience and will not be graded.) Marginal Revenue = dTR/dQ.

Price ($/box)	Quantity (boxes/day)	Total Revenue ($/day)	Marginal revenue (∆TR/∆P)	∆Q/∆P (not graded)	P/Q (not graded)	Own price point elasticity E(Q,P)
10	0
9	40
8	80
7	120
6	160
5	200
4	240
3	280
2	320
1	360
0	400

2. Make two graphs, one directly below the other (so you can compare):

(Remember to label curves, label axes with variables and units of measure, and indicate intercepts and other defining points [like maximum or minimum points].)

1. In the upper chart, graph the inverse Demand curve for Apples.
2. In the lower chart, using Quantity across the horizontal axis with identical spacing to the upper chart, graph Total Revenue from Apple sales.

Answer 1

Price($)	Quantity	TR = P*Q	MR =∆TR/∆Q	∆Q/∆P	P/Q	price elasticity (ed)
10	0	0
9	40	360	8	-40	0.23	-9.00
8	80	640	6	-40	0.10	-4.00
7	120	840	4	-40	0.06	-2.33
6	160	960	2	-40	0.04	-1.50
5	200	1000	0	-40	0.03	-1.00
4	240	960	-2	-40	0.02	-0.67
3	280	840	-4	-40	0.01	-0.43
2	320	640	-6	-40	0.01	-0.25
1	360	360	-8	-40	0.00	-0.11
0	400	0	-10	-40	0.00	0.00

a) i) ii)   QUANTITY