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Tue 18 Oct, 2016 08:04 pm

So I'm pretty sure I figured out number one and I believe the answer to number two is Normal. I am using derivatives to figure this call; dQ/dM * m/Q

Suppose the market demand function for a given product is π = 12 β π + βπ, where π

is the productβs price and π is aggregate income.

a. Calculate price elasticity (π) at π = 2 and π = 100. Is demand elastic, inelastic,

or unit elastic at these values? (2 pt)

b. Calculate income elasticity (ππ) at π = 2 and π = 100. Is this a normal good or

an inferior good? (2 pt)

c. Now suppose a single producer is operating in this market. Fixing income at

π = 100, use the inverse demand curve to derive the total revenue and marginal

revenue functions of this producer, π
(π) and ππ
(π).