The market for lemonade has 10 potential consumers, each having an individual de
ID: 1169747 • Letter: T
Question
The market for lemonade has 10 potential consumers, each having an individual demand curve P=101-10Qi . Find market demand curve using algebra. Draw an individual demand curve and the market demand curve in the same graph. What is the quantity demanded by each individual and in the maker as a whole when lemonade is priced at P=$1/cup?
2.)Consider the demand curve Q=100-5P.
a.) Draw the demand curve and indicate which portion of the curve is elastic, which portion is inelastic, and which portion is unit elastic.
b.) What is the elasticity of demand at the price of P=$15?
c.)At the price of P=$15, calculate the revenue for the seller?
d.)At what price the revenue is maximized?
Explanation / Answer
Individual demand curve : P = 101 - 10Qi
Market demand curve : P = 101 - 10*10Qi or P = 101 - 100Qi (for 10 potential customers)
When lemonade is priced at $1/cup, Individual quantity = 10
Market quantity = 1
2) Demand curve : Q = 100-5P
b) Elasticity of demand = dp/dQ x P/Q = -3
c) Revenue = P*Q = 15*25 = $375
d) For maximum revenue, d(Total Revenue)/D(Price) = 0 which means d(100P-5P^2)/dP = 0 which yield P= $10
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