# Econ Question - Inferior Goods

1. Feb 3, 2007

### chickenlips

1. The problem statement, all variables and given/known data
Here is the question:

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

3. The attempt at a solution
I'm not sure how to go about figuring this out....what should I look for?

2. Feb 3, 2007

### Gokul43201

Staff Emeritus

How is revenue related to demand and price? Do you have to make an assumption for this relationship to work?

3. Feb 4, 2007

### HallsofIvy

Staff Emeritus
What is the demand when P= 1? What is the demand when P= 2? Does increasing the price increase the demand?

4. Feb 4, 2007

### chickenlips

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. Feb 5, 2007

### Gokul43201

Staff Emeritus
I think you mean to say the demand is decreasing. But this does not tell you what the revenue is doing.

6. Feb 5, 2007

### chemisttree

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. Feb 7, 2007

### Gokul43201

Staff Emeritus
I sure hope not. Revenue is the product of demand and price (in the limit of infinite supply).

8. Feb 7, 2007

### Panda

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?