The marketing department of Acme Inc. has estimated the following demand function for its popular carpet...

The marketing department of Acme Inc. has estimated the following demand function for its popular carpet deodorizer, Freshbreeze:

Q^D = 100 -5p

where Q is the quantity of an 8 oz box sold (in thousand units) and p the price of an 8 oz. box.

1. Calculate the point price elasticity of demand E^D for price, $1, 2,3,……$19.

2. Describe the pattern of price elasticity of demand that you have calculated along the demand curve. (Include your brief explanation)

3. Have a graph including the demand curve.

Expert Solution

2) Pattern of price elasticity of demand:

As price is increasing along the demand curve, price elasticity of demand also rises. At the mid point of the demand curve, price elastic of demand is 1. When Price is 20, elasticity is infinity. When price is 0 there the price elasticity of demand is 0. In the low range of price, Demand curve is Inelastic as price elasticity of demand is less than 1. In the high range of price , demand curve is elastic as price elasticity of demand is greater than 1.

Rahul Sunny answered 2 years ago

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