Answer Happy

1. Pems R Us sells designer-brand pens. The demand equation for annual sales of these pens is q=-900p +60,000, where p is the price per pen. They are very popular and the company has been thinking of raising the price. Find the elasticity of demand if the price is currently $25. Is the demand elastic, inelastic, or unit elastic? Based on the elasticity of demand, should they increase the price by 20%? Support your decision by calculating total revenue before and after the price increase. Given: q=-900p + 60,000 2. For a particular good, the demand function is D(p) 75 1.5p a. Find elasticity of demand when p = 35. b. Is demand elastic, inelastic or unit elastic? c. If the price is decreased by $5, predict if the total revenue will increase, decrease or stay the same based on the price elasticity of demand. d. Find the total revenue before the price change and after to see if your prediction in part c. was correct. 3. Sales at a fireworks outlet (in thousands of dollars) on day x can be approximated by S(x) = 1.25 + (5x) * (e-0.35x) where x = 1 corresponds to July 1. Find the amount of sales and rate of change of sales on July 4th. Explain what the rate of change tells us in this problem.