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# Microeconomics question (I'M DESPERATE) watch

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1. Hi, would anyone be able to help me with this question that I've been stuck on? I'll post the previous questions too with my answers because I think they're relevant.

The industry demand schedule for Nike trainers is as follows:

 Price Quantity demanded 20 40 25 35 30 30 35 25 40 20

(c) Use the information provided to illustrate the demand schedule.
Okay so here I just did a demand curve with the quantities matching the prices

(d) Using the mid-point method, calculate and explain the significance of the price elasticity of demand as the price increases from £20-£25.
This is basically my answer in note form:15/37.5 = 0.4
5/22.5 = 0.22
0.4/0.22 =
1.8 (this is the PED)
Since PED>1, (elastic demand) then an increase in price leads to a more than proportionate fall in quantity demanded and total revenue decreases

This is the question I'm stuck on:
(e) Illustrate on the demand curve the point at which Nike would maximise its total revenue and discuss its significance in terms of elasticity.

If anyone could explain the answer to this for me I would seriously appreciate it!
2. (Original post by powderpuffgirl)
(e) Illustrate on the demand curve the point at which Nike would maximise its total revenue and discuss its significance in terms of elasticity.

If anyone could explain the answer to this for me I would seriously appreciate it!
Total Revenue is maximised when Marginal Revenue (the rise in revenue from the sale of an additional unit of output) is zero (since when MR is positive the firm can continue to increase TR by producing more goods). This occurs on the unit elastic (i.e. PED = 1) part of the demand curve as there is a proportional change in demand to price which results in the same level of revenue.

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Updated: December 25, 2014
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