The Utopia television company faces a demand function for its products which can be expressed as Q = 4000 – P + 0.5Y where Q is the number of televisions, P is the price per television, and Y is average monthly income. Average monthly income is currently equal to RM2,000. a) Express the inverse demand curve faced by Utopia at the current income level. (2 marks) b) At what price and quantity is Utopia’s total revenue (TR) maximum? State the maximum TR value. Show the value of marginal revenue at this price and quantity. (4 marks) c) What is the price elasticity of demand for Utopia’s demand function at the price and quantity derived in (b)? Interpret. (3 marks) d) Why might Utopia choose to produce at a price and quantity different than that derived in (b)? (3 marks)

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The Utopia television company faces a demand function for its products which can be expressed as Q = 4000 – P + 0.5Y where Q is the number of televisions, P is the price per television, and Y is average monthly income.

Average monthly income is currently equal to RM2,000.

a) Express the inverse demand curve faced by Utopia at the current income level. (2 marks)

b) At what price and quantity is Utopia’s total revenue (TR) maximum? State the maximum TR value. Show the value of marginal revenue at this price and quantity. (4 marks)

c) What is the price elasticity of demand for Utopia’s demand function at the price and quantity derived in (b)? Interpret. (3 marks)

d) Why might Utopia choose to produce at a price and quantity different than that derived in (b)? (3 marks)

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