Question

Assume you are selling a product in which at a price of $10, you can sell 90 units. When the price increases to $11, you can only sell 63 units. Given this change in price and sales, answer the following:

What is the price elasticity of demand for your product?

Is demand elastic, unit-elastic or inelastic?

What is the change in revenue for this product from the price increase?

Answer #1

Ans:

1) Calculation of price elasticity of demand

price elasticity of demand = % change in demand / % change in price

% change in demand = (63 - 90) / 90

= -27 / 90

= -0.3 or -30%

% change in price = ($11 - $10) / $10

= $1/$10

= 0.1 or 10%

price elasticity of demand = -30% / 10%

= -3

2) elastic

Since the price elasticity of demand is greater than one, we can say that the demand is elastic.

3) Change in revenue = ($11 * 63) - ($10 * 90)

= $693 - $900

= -$207

change in revenue for this product from the price increase is -$207.

Define what happens to revenue and why, when there is a price
increase in a product that has a price elasticity of demand that is
elastic, inelastic, and unity elastic. In your answer be sure to
also explain what makes price elasticity of demand elastic,
inelastic, and unit elastic.

11.
You decrease the price of your product but you find that
revenues are falling. Given this information, you can conclude that
the elasticity of demand for your product is:
A. unitary elastic
B. inelastic
C. elastic
10.
If the Smithson Industrial Product Corp. firm lowers the price
of its product and finds that total revenues increase, we can
conclude that:
A. consumers are elastic and are
price sensitive
B. consumers are inelastic and are
not price sensitive
C. consumers are unitary
elastic
Marks University performs...

True/False Answer Following Questions.......16-. The demand for
oil would become less elastic if the price of oil increases by
significant amount for a long period of time. 17-. When demand is
inelastic, total revenue goes down in proportion to a price
increase. 18- Elasticity of demand is always negative. 19-. If the
price of a good increases from $100 to $110 and quantity demanded
decreases from 100 units to 90 units, the demand would be
classified as unit elastic. 20-...

The price elasticity of demand for a product is -0.5. You know
that...
Demand for this product is inelastic.
Demand for this product is neither elastic or inelastic. It is
"unit elastic."
Demand for this product is elastic.
Not enough information to answer this question.

Categories of Price Elasticity of Demand
For each of the following values for price elasticity of demand,
indicate whether demand is elastic, inelastic, perfectly elastic,
perfectly inelastic, or unit elastic. Also, indicate (increase,
decrease, no effect) what would happen to total revenue if a firm
raised the price in each elasticity range.
Price Elasticity of Demand
equals
Descriptionn of Elasticity
Total Revenue Change
-2.5
-1.0
-0.8
-infinity
0

Assume economists have determined that the price elasticity of
demand for housing in a given range of the demand curve is -1.75.
Suppose that the price of housing increases by 10 percent.
Given the value of price elasticity of demand, is
demand for housing elastic or inelastic in the given range of the
demand curve?
What happens to quantity demanded of housing (what is the
percentage change in the quantity demanded of housing) as
price of housing increases by 10%?...

1. When an increase in price of product A results in a sales
decrease of product A and product B, the two products are said to
be:
a) Dynamic
b) Complementary
c) Subsitutes
d) Interactive
2. A product’s price has increased by 25% but demand has not
been affected. It can be concluded that this product has:
a) Unitary elasticity
b) Inelastic demand
c) Slightly inelastic demand
d) Elastic demand

The manager of Beta Company is considering to sell its new
product at the price of $500 and the price elasticity of demand at
the price range is -0.8. (i) What is the marginal revenue from the
sales of the product at the demand point? and (ii) As a consultant
to this company, are you going to recommend to the company a higher
price or a lower price than $500?
Answers:
a) MR = +$125, and recommend a lower price....

5a)The price of car batteries increases by 10 percent and the
quantity demanded decreases by 10 percent. What is the price
elasticity of car batteries?
Unit elastic, and revenue will not change
Elastic, and revenue will increase
Elastic, and revenue will decrease
Inelastic, and revenue will increase
b)Good A and Good B have negative income elasticities, but Good
A is more negative than Good B. If the economy’s income increases,
which of the following is true?
Good A’s demand will...

When Vincent’s Produce increases the price of strawberries from
$4.75/pound to $5.25/pound, he finds that sales drop from 330
pounds/week to 310 pounds/week.
Calculate the price elasticity of demand for Vincent’s
strawberries.
Is demand elastic, inelastic or unit elastic?
Did Vincent’s revenue from strawberry sales increase, decrease
or stay the same?
Med rents surfboards on the big island of Hawaii. He’s been
charging $10/hour and averages 32 rentals an hour. When he lowered
the rate to $9.50/hour the average hourly...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 3 minutes ago

asked 25 minutes ago

asked 25 minutes ago

asked 27 minutes ago

asked 36 minutes ago

asked 36 minutes ago

asked 40 minutes ago

asked 41 minutes ago

asked 52 minutes ago

asked 53 minutes ago

asked 53 minutes ago