Question

Suppose an office supply store increased its price of file folders from $.79/box to $.99/box and...

Suppose an office supply store increased its price of file folders from $.79/box to $.99/box and the quantity demanded decreased from 85 boxes/month to 83 boxes/month.

What is the price elasticity of demand for file folders?

Tell whether the demand is elastic, unit elastic or inelastic.

What happens to the total revenue generated for the office supply store as a result of the price increase, and how does it show the relationship between elasticity and total revenue?

Homework Answers

Answer #1

PED = ∆Q/∆P *( P1 + P2 / Q1 + Q2)

          = (83 - 85) / (0.99 - 0.79) * (0.79 + 0.99) / (85 + 83)

          = (-2 / 0.20) * (1.78 / 168)

         = -3.56 / 33.6

         = -0.11

The absolute value of PED is 0.11. Since it is less than 1, inelastic.

Since demand is inelastic, an increase in price will lead to an increase in total revenue. Thus, total revenue for the office supply store will increase as a result of the price increase.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
3. At the price of $20, the quantity demand of lawn hoses was 100. The price...
3. At the price of $20, the quantity demand of lawn hoses was 100. The price increased to $25, and the quantity demanded dropped to 95. [ The two points on the demand curve are Point A: (100, $20) and Point B (95, $25).] a) Calculate the price elasticity of demand for the hoses. ____________ b) Is it elastic, inelastic or unitary elastic? _____________ What happens to the total revenue in this case?_______________ What would happen to the total revenue...
1.A box of corn flakes cereal is likely to be: very price elastic, since there are...
1.A box of corn flakes cereal is likely to be: very price elastic, since there are many close substitutes available. less price elastic, since there are many close substitutes available. very price elastic, since the cereal is a unique product. less price elastic, since the cereal is a unique product. 2. If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is: −1.5 and is elastic. −0.67 and...
Suppose the price of craft beer increased from $9.5 to $10.50 per six pack. As a...
Suppose the price of craft beer increased from $9.5 to $10.50 per six pack. As a result the weekly quantity of craft beer sold in Blacksburg decreased from 10,250 to 9,750 six packs. From this information, we can conclude that craft beer is an __________ good and that total revenue from the sale of craft beer in Blacksburg _________ due to higher prices. elastic, increased inelastic, increased elastic, decreased inelastic, decreased normal good, increased normal good, decreased Question 17 Inferior...
Suppose a decrease in the price of shoes from $50 to $30 per pair leads to...
Suppose a decrease in the price of shoes from $50 to $30 per pair leads to an increase in the quantity of shoes demanded from 100 million to 150 million pairs. Use the midpoint formula to find the price elasticity of demand. Next, explain what would happen to revenues for a store decreasing the price of shoes to $30. When the price of a price elastic good goes up, what happens to revenues? When the price of a price inelastic...
5. Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3...
5. Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo’s demand curve? Multiple Choice a.0.235 b.2.00 c.4.25 d.6.33 6. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi’s demand curve? Multiple Choice a.0.1 b.0.8 c.10.0 d.1.0 7....
I went to the 99 Cent store the other day and got really excited at some...
I went to the 99 Cent store the other day and got really excited at some amazing bargains: The scented candles that normally sold for $5.99 at Target was at the 99 Cent Store. After grabbing about a dozen of them and stuffing them into my shopping basket, I realized they weren’t 99 cents! They were marked as $1.99. I was a little annoyed and not a little disappointed as I mumbled to myself, “the audacity of them to keep...
Peanut butter price went from $2 per pound to $4, while its quantity demanded dropped from...
Peanut butter price went from $2 per pound to $4, while its quantity demanded dropped from 360 to 300 million pounds. Based on this information, please answer the following questions. Question 14: What is the demand function for peanut butter? To answer this question, please solve for parameters a and b in P= a- bQD. Question 15: Denote the elasticity of peanut butter demand with respect to price as EDP. What is the value of EDP at QD=360 million pounds?...
1-As we move up the demand curve, the price elasticity of demand * A) increases B)...
1-As we move up the demand curve, the price elasticity of demand * A) increases B) decreases C) becomes unitary D) does not change 2-If the price of lemonade increases relative to the price of grape juice, the demand for: * A) grape juice will decrease. B) grape juice will increase. C) lemonade will decrease. D) lemonade will increase. 3-An increase in price will result in no change in total revenue if: * A) the percentage change in price is...
1. Consider the following supply schedules for Kelby, Jack, and Kate, who are the only suppliers...
1. Consider the following supply schedules for Kelby, Jack, and Kate, who are the only suppliers in the market for Good Y:     Kelby   Jack   Kate Price   Units Produced $5   12   8   4 $4   11   6   3 $3   9   4   2 $2   5   2   1 $1   2   1   0 If the market sees 15 units of Good Y exchanged, what is the likeliest price in the market? A. $1 B. $2 C. $3 D. $4 E. $5 2. Given that...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following...
ECO 101-S70: Final Quiz 2 CHAPTER 3: Demand, Supply and Equilibrium 1. Which of the following could cause a decrease in consumer demand for product X? a.   a decrease in consumer income b.   an increase in the prices of goods which are good substitutes for product X c. an increase in the price which consumers expect will prevail for product X in the future d. a decrease in the supply of product X 2. If two goods are substitutes for...