+89 Suppose a supply function is given by
Q = 200 − 4 P − 0.2 P^2 .
(i) Find the price elasticity of supply if the current price is P = 15.
(ii) What is the percentage change in supply if the price rises by 3%?
(b) A snooker club has 150 members each paying e 60 membership fee per month. The club would like to raise this fee, but a market survey predicts that for every price increase of e5 it will lose 10 members. What should the monthly membership fee be to maximize the revenue?
+33616 (i) Price elasticity iseems to be %change of quantity divided by %change in price.
Q = 200 - 4P - 0.2P^2
When P = 15 Q = 95
If P increases by 1% (to 15.15) then Q becomes 93.495 a change (decrease) of 1.6%
So presumably the price elasticity of supply is 1.6%/1% or 1.6 (or -1.6, since Q decreases?)
(This is largely guesswork based on a quick search for the meaning of price elasticity!.)
