The airline company Up in the Air has calculated that the demand for pajamas for a certain route (on an A380) as a function of the price, p as x(p)= 600-p, where 0 P 600 a) Find an expression for the price elasticity i.e..E (P
) b) Calculate the price elasticity when p = 200, and give an interpretation of the result.
c) Suppose Up in the Air wishes to increase their sales revenue by selling pajamas. Base your answer on the result you obtained in the problem
b) and explain whether the company should increase or decrease the price, or keep the price of p=200 constant.
d) Calculate at what price the elasticity is unit elastic, i.e. when the elasticity is equal to -1. Explain why this price maximizes the sales revenue.
