Econ Question - Inferior Goods

  • Thread starter chickenlips
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In summary: Assuming you have enough stock such that you will always meet demand. How much revenue would you make if P=1, P=2?If P=1, you would make 27 revenue. If P=2, you would make 24 revenue. Increasing the price does not increase the demand, but it does decrease the revenue.
  • #1
chickenlips
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Homework Statement


Here is the question:

Suppose demand is given by Q = 30 – 3P. Does this indicate increasing prices increases revenue?

Homework Equations





The Attempt at a Solution


I'm not sure how to go about figuring this out...what should I look for?
 
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  • #2
ACcording to our guidelines (see link below), we can't help you until you show us your effort first.

How is revenue related to demand and price? Do you have to make an assumption for this relationship to work?
 
  • #3
What is the demand when P= 1? What is the demand when P= 2? Does increasing the price increase the demand?
 
  • #4
Thanks very much Halls! That is exactly what I was looking for!

So, if we let p=1, we get 30-3(1)=27. if we let p=2, we get 30-3(2)=24, and if we let p=3, we get 30-3(3)=21. The price is obviously decreasing...

Thanks again!
 
  • #5
chickenlips said:
Thanks very much Halls! That is exactly what I was looking for!

So, if we let p=1, we get 30-3(1)=27. if we let p=2, we get 30-3(2)=24, and if we let p=3, we get 30-3(3)=21. The price is obviously decreasing...
I think you mean to say the demand is decreasing. But this does not tell you what the revenue is doing.
 
  • #6
The equation of Demand (Q) is linear. Plot Q vs. P and see at what point Q will become zero (no demand = no revenue).

I assume that your instructor interprets demand as a euphemism for revenue in this example.
 
  • #7
chemisttree said:
I assume that your instructor interprets demand as a euphemism for revenue in this example.
I sure hope not. Revenue is the product of demand and price (in the limit of infinite supply).
 
  • #8
So far the link between Demand (Q) and Price (P) has been determined as it is the linear plot Q= 30-3P, but Revenue (R) has not been calculated at all.

Assuming you have enough stock such that you will always meet demand. How much revenue would you make if P=1, P=2?
 

1. What are inferior goods?

Inferior goods are a type of economic good that experiences a decrease in demand as consumer income increases. This is because consumers tend to switch to higher quality or more expensive goods as their income rises.

2. How do inferior goods differ from normal goods?

Inferior goods are different from normal goods in that their demand decreases as consumer income increases, while normal goods experience an increase in demand as consumer income increases.

3. Can you give an example of an inferior good?

An example of an inferior good would be generic or store-brand products. As consumers' income increases, they may switch to name-brand or higher quality products.

4. Are inferior goods always of lower quality?

No, inferior goods can vary in quality and price. The key characteristic of an inferior good is that its demand decreases as consumer income increases, regardless of its quality.

5. How do inferior goods impact the economy?

Inferior goods can have an impact on the economy by affecting consumer spending and inflation. As consumer income increases, a shift towards normal goods can lead to an increase in inflation, as well as changes in production and employment in industries that produce inferior goods.

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