The managementt of Titan Tire company has determined that the quantity demanded
ID: 2835968 • Letter: T
Question
The managementt of Titan Tire company has determined that the quantity demanded X of their super Titan tires per week is related to the unit price p by the equation x= under root 144-p (0 less than equal to0 p less than equal to 144) where p is measured in dollars and in units of a thousand. a) Find the elasticity of demand equation, E(p). b) when the tire price is $108, is demand elastic , inelastic or unitary? c) If the tire price is increased slightly from $108, what will happen to the revenue?Explanation / Answer
a)Elasticity of demand=dx/dP*(P/x)=-1/(2sqrt(144-p))*p/sqrt(144-p)=-p/2(144-p)
b)for p=108,
elasticity=-108/2*(144-108)=-108/72=-1.5
Since elasticity is greater than 1, it is elastic.
c)On increasing price, the revenue will still increase since the decrease in demand is smaller than rise in price.