Question

A fried chicken franchise finds that the demand equation for its new roast chicken product, "Roasted Rooster," is given by p = 45 / q 1.5
where p is the price (in dollars) per quarter-chicken serving and q is the number of quarter-chicken servings that can be sold per hour at this price.

1) Express q as a function of p.

2) Find the price elasticity of demand when the price is set at $4.00 per serving.

Answer 1

Answer:

1. $q=(\dfrac{45}{p})^{\frac{2}{3}}$

2. $E_d=-\dfrac{2}{3}$

Step-by-step explanation:

The given demand equation is

$p=\dfrac{45}{q^{1.5}}$

where p is the price (in dollars) per quarter-chicken serving and q is the number of quarter-chicken servings that can be sold per hour at this price.

Part 1 :

We need to Express q as a function of p.

The given equation can be rewritten as

$q^{1.5}=\dfrac{45}{p}$

Using the properties of exponent, we get

$q=(\dfrac{45}{p})^{\frac{1}{1.5}}$      $[\because x^n=a\Rightarrow x=a^{\frac{1}{n}}]$

$q=(\dfrac{45}{p})^{\frac{2}{3}}$

Therefore, the required equation is $q=(\dfrac{45}{p})^{\frac{2}{3}}$.

Part 2 :

$q=(45)^{\frac{2}{3}}p^{-\frac{2}{3}}$

Differentiate q with respect to p.

$\dfrac{dq}{dp}=(45)^{\frac{2}{3}}(-\dfrac{2}{3})(p^{-\frac{2}{3}-1}})$

$\dfrac{dq}{dp}=(45)^{\frac{2}{3}}(-\dfrac{2}{3})(p^{-\frac{5}{3}})$

$\dfrac{dq}{dp}=(45)^{\frac{2}{3}}(-\dfrac{2}{3})(\dfrac{1}{p^{\frac{5}{3}}})$

Formula for price elasticity of demand is

$E_d=\dfrac{dq}{dp}\times \dfrac{p}{q}$

$E_d=(45)^{\frac{2}{3}}(-\dfrac{2}{3})(\dfrac{1}{p^{\frac{5}{3}}})\times \dfrac{p}{(45)^{\frac{2}{3}}p^{-\frac{2}{3}}}$

Cancel out common factors.

$E_d=(-\dfrac{2}{3})(\dfrac{1}{p^{\frac{5}{3}}})\times \dfrac{p}{p^{-\frac{2}{3}}}$

Using the properties of exponents we get

$E_d=-\dfrac{2}{3}(p^{-\frac{5}{3}+1-(-\frac{2}{3})})$

$E_d=-\dfrac{2}{3}(p^{0})$

$E_d=-\dfrac{2}{3}$

Therefore, the price elasticity of demand is -2/3.