Econ Question - Inferior Goods

  • #1

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?
 

Answers and Replies

  • #2
Gokul43201
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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
HallsofIvy
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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
Gokul43201
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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
chemisttree
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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
Gokul43201
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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
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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?
 

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