A consultant estimates the Price / Quantity relationship for New World Pizza to be P = 50 – 5Q. (Hint: For what follows, you might find it helpful to calculate marginal revenue.)
a. At what output rate is demand unitary elastic?
b. Over what range of output is demand elastic?
c. At the current price, eight units are demanded each period. If the objective is to increase total revenue, should the price be increased or decreased? Explain.
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