The Ice Cream Parlor is the only ice cream parlor in Smithtown. Michael, the son of the owner, has just come back from college, where he majors in business administration. In his course in managerial economics, Michael has just studied demand analysis, and he decides to apply what he has learned to estimate the demand for ice cream in his father's parlor during his summer vacation. Using regression analysis, Michael estimates the following demand function:
where the subscript I refers to ice cream portions served per day in his father's parlor, and P_1 is the dollar price.
Michael then sets out to
A) derive the demand schedule for ice cream and plot it
B) find the point price elasticity of demand at each dollar price, from P=$6 to P=$0
C) find the arc price elasticity of demand between consecutive dollar prices (o.e., between P=$6 and P=$5, P=$5 and P=$4, and so on). Show how Michael would get his results