Question

4. a) On Tuesday, price and quantity demanded are $7 and 120 units, respectively. A week later, price and quantity demanded are $6 and 150 units, respectively. What is the price elasticity of demand between the price of $7 and the price of $6? Use both the mid-point formula method and the percentage change method. b) The numbers from both methods are a bit different but their interpretation is the same. Interpret this elasticity. (i.e. is it elastic or inelastic or unitary?) c) Given your finding above, should you raise or lower the price of this product in order to increase total rev venue? Briefly explain.

Answer #1

(a)

(i) Using midpoint method, Elasticity = (Change in quantity / Average quantity) / (Change in price / Average price)

= [(150 - 120) / (150 + 120)] / [$(6 - 7) / $(6 + 7)]

= (30 / 270) / (- 1 / 13)

= - 1.44

(ii) Using point method, Elasticity = (Change in demand / Original demand) / (Change in price / Original price)

= [(150 - 120) / 120] / [$(6 - 7) / $7)]

= (30 / 120) / (- 1 / 7)

= - 1.75

(b) Using both methods, absolute value of elasticity is greater than 1, so demand is elastic.

(c) With elastic demand, total revenue can be increased by decreasing price.

16. At a price of $4, quantity demanded is 100; and at a price
of $6, quantity demanded is 120. Using the midpoint formula, the
price elasticity of demand is ________ and demand is ________.
A) 0.1; inelastic
B) 0.45; inelastic
C) -2.2; elastic
D) -10; elastic

If the price of a good A goes from $5 to $4 and the quantity
demanded goes from 60 to 70, the price elasticity of demand is?
a. elastic (greater than 1)
b. inelastic (less than 1)
c. unitary elastic (equal to 1)
d. none of the above

8.
When the price increases by 30 percent and the quantity demanded
drops by 30 percent, the price elasticity of demand is
unitary elastic.
elastic.
perfectly inelastic.
inelastic.
perfectly inelastic.
9.
If the cross-price elasticity of demand between Good A and Good
B is 2 and the percentage change in price of Good A is 5 percent,
what is the percentage change in quantity demanded of Good B?
-3 percent
1.50 percent
10 percent
3 percent
-1.25 percent

A price change causes the quantity demanded for a good to
increase by 20 percent and the total revenue of that good decreases
by 15 percent. What can you say about the price elasticity of
demand at this point.
It's elastic
It's inelastic
It's unitary elastic
It's perfectly elastic

If the quantity demanded decreases by %15 and the price goes
from 1.25 to 1.75 what is the elasticity of demand? Is it elastic
or inelastic?
If the price goes down by 20% and the quantity sold increases
from 80 to 120 units what is the elasticity of demand? Is it
elastic or inelastic?

A product increases the price 13% and reduced the quantity
demanded in 3%. Calculate the elasticity. b. Indicate whether the
curve is elastic, inelastic or unitary. c. Identify the type of
product. d. Indicate whether the increase in price causes an
increase or decrease in income total of the supplier and the
reason.

In Market A, a 4 percent increase in price reduces the quantity
demanded by 2 percent. In Market B, a 3 percent increase in price
reduces the quantity demanded by 4 percent. The demand in Market A
and Market B are considered______ and _______, respectively.
a) unit price-elastic; perfectly price-inelastic.
b) price-elastic; price-inelastic.
c) perfectly price-elastic; unit price-elastic.
d) price-inelastic; price-elastic.

Price Quantity Demanded $0 50 $2 40 $4 30 $6 20 $8 10 a. Using
the midpoint method, calculate the price elasticity of demand
between $4 and $6? b. Between two quantities of 30 to 20, is demand
elastic, inelastic, or unit elastic? Show the work.

1. Suppose the quantity demanded of ice cream rises from 200 to
300 units when the price falls from AED 10 to AED 5. What would be
price elasticity?
a. Difficult to calculate with this information
b. -1 ( Unitary Elastic)
c. -0.75 ( Inelastic)
d. -1.25 ( Highly Elastic)
.
2. What would a manager do to increase the revenue, if he finds
the product to be highly price elastic?
a. Increase the price
b. Keep the price same...

USE TABLE 2 FOR QUESTIONS 24-30
PRICE PER UNIT
QUANTITY DEMANDED PER WEEK
$12.00
25
$11.50
30
$11.00
35
$10.50
40
$10.00
45
$9.50
49
$9.00
50
$8.50
52
$8.00
53
$7.50
54
$7.00
55
24. Using average values what is the price elasticity of demand
when price rises from $7.50 to $8?
A) 3.45
B) 2.85
C) .70
D) .29
25. Using averages what is the price elasticity of demand when
price changes from $8.50 to $9?
A) .69...

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