Recall the Application about choosing a price for drones based on a linear demand curve to answer the following question(s).
-Recall the Application.Suppose a firm that produces drones has a linear demand curve for its product,with a vertical intercept of $1,200.If the firm wants the demand for its product to be price-inelastic,the maximum price it should charge is
A) $300.
B) $600.
C) $1,200.
D) $2,400.

Question

Quizplus · Accepted Answer

For demand to be price inelastic, the absolute value of the price elasticity of demand must be less than 1. This occurs when the price is set in the upper half of the demand curve. Given a linear demand curve with a vertical intercept of $1,200, the midpoint price, where elasticity transitions from elastic to inelastic, is $600. Therefore, to ensure inelastic demand, the firm should charge a maximum of $600.

Recall the Application About Choosing a Price for Drones Based