Thanks John. The presentation was straightforward with practical illustration. The interesting part is the effects on profit and MR and MC as selling price p.u. and cost p.u. changes.

According to the lecture notes, the optimal selling price is where MR = MC but this was not reflected in the table why? However, it was realistic enough to chose a selling price p.u. of $15 as this indicate a higher profit of $360.

I really found the lecture was of help. BTW, sir, you are an adorable teacher to me, making the lessons so understandable. Truly appreciate your hard work. Many thanks.

A low PED certainly means that an increase in selling price will result in only a small decrease in the demand. So there is the possibility that increasing the selling price will result in more profit.

For elasticity you change the price by just one increment, otherwise it was be a rather meaningless exercise and just be playing with numbers for the fun of it.

Actually I was wrong in my answer before (and you are wrong also) If you drop from 13.5 to 13, then the % change is 0.5/13.5 = 3.70%
The demand change from 600 to 700, so the % change = 100/600 = 16.67%

Samuel Koroma says

Thanks John. The presentation was straightforward with practical illustration. The interesting part is the effects on profit and MR and MC as selling price p.u. and cost p.u. changes.

According to the lecture notes, the optimal selling price is where MR = MC but this was not reflected in the table why? However, it was realistic enough to chose a selling price p.u. of $15 as this indicate a higher profit of $360.

John Moffat says

But I explain this in the lecture. In a tabular question we assume that the only possible selling prices are those given in the question.

Samuel Koroma says

Acknowledged sir and thank you

John Moffat says

You are welcome

adeeb says

plz help 🙁

if we want to see the same exact question and solve using MR=a-b2Q and assume mr=mc then whats the mc value ?

John Moffat says

You could not be asked do it using formulae because the marginal cost keeps changing.

Sue says

I really found the lecture was of help. BTW, sir, you are an adorable teacher to me, making the lessons so understandable. Truly appreciate your hard work. Many thanks.

John Moffat says

Thank you very much for your comment 🙂

majid says

A low PED is better for the business to make high profit than higher PED?

because low PED means that the SP is increasing by one percentage and there is no change or the demand remains same. it is correct ?

John Moffat says

A low PED certainly means that an increase in selling price will result in only a small decrease in the demand. So there is the possibility that increasing the selling price will result in more profit.

majid says

Therefore a lower PED is better than higher PED?

Kate says

I think they both meant dropping the price from $16 to $13 which i am also getting 32

John Moffat says

For elasticity you change the price by just one increment, otherwise it was be a rather meaningless exercise and just be playing with numbers for the fun of it.

Jonathanforstudying says

Example 3, current selling price is $16 per unit

I tried dropping to $13 instead of 15.5, i notice the elasticity of demand is -20. Is my answer correct?

John Moffat says

Yes – it is correct.

The elasticity is different at different price levels.

nubian73 says

I made it 32 when dropping to $13, am I doing something wrong?

John Moffat says

Actually I was wrong in my answer before (and you are wrong also) If you drop from 13.5 to 13, then the % change is 0.5/13.5 = 3.70%

The demand change from 600 to 700, so the % change = 100/600 = 16.67%

So the elasticity = 16.67/3.70 = 4.5%