Problem
Part 1
Take the scenario of that a monthly demand for housing in Miami is QD = 10000 - 10P. If the initial price is $400, calculate the price elasticity of demand between a price of $500 and $400.
You are to explain the meaning of your answer using the concept of elasticity.
Part 2
Take the scenario that the prevailing price is $400. Would you recommend an increase in the price to $500? Explain your answer using the concept of elasticity.
If your recommendation is in the negative side, describe the conditions under which the recommendation would be made.
Part 3
Find the total revenue from the sale of houses at $400, and then at $500. You are to fully explain with calculations if a different conclusion is reached regarding the effect of the increase in price.