Given the demand function Q_X = 5,000 - 250P_X +120P_Y +.04I where P_Y= $50.00 and I = $60,000, the average revenue equation is:
AR = 13.6 - .004Q_X.

Question

Given the demand function Q_X = 5,000 - 250P_X +120P_Y +.04I where P_Y= $50.00 and I = $60,000, the average revenue equation is: AR = 13.6 - .004Q_X.

Quizplus · Accepted Answer

To find the average revenue equation, we need to divide the total revenue equation by the quantity demanded. Total revenue is equal to price times quantity demanded, so we have:

TR = PS1U1B1XS1U1B0(QS1U1B1XS1U1B0) 
AR = TR/QS1U1B1XS1U1B0 
AR = PS1U1B1XS1U1B0 - (250/QS1U1B1XS1U1B0)PS1U1B1YS1U1B0 + (0.04/ QS1U1B1XS1U1B0)I

Simplifying this expression, we get:

AR = 50 - (0.05)YS1U1B0 + (0.000008)I

Therefore, the given equation for average revenue (AR = 13.6 - .004QS1U1B1XS1U1B0) is incorrect.

Given the Demand Function QX = 5,000 - 250PX +120PY

Given the Demand Function Q_X = 5,000 - 250P_X +120P_Y