Suppose that the Demand for a product X has been estimated to be:
Qx = 400 + 0.002I + 8Z – 5Py – 20Px
Where Qx is the quantity demanded for the product X, Px is the price of product X, Py is the price of a related product Y, I is the level of income, and Zis some other variable that affects the demand for product X.
Current values of the variables are: I = 10,000; Z = 150; Py = 50; Px = 50
Construct the demand, inverse demand, and marginal revenue equations for product X. Also find the revenue maximizing quantity and price.
Demand Curve Equation: Qx = ___________________________
Inverse Demand Curve Equation: Px = ___________________________
Marginal Revenue Equation: MRx = ___________________________
Revenue Maximizing Quantity__________________
Revenue Maximizing Price _____________________
Assuming marginal cost equals 20, what is the profit-maximizing price and quantity for product X?
P* = _____________________ Q* = _____________________________
