Question

1. Suppose the price of widgets rises from $7 to $9 and consumption of widgets falls...

1. Suppose the price of widgets rises from $7 to $9 and consumption of widgets falls from 25 widgets a month to 15 widgets. a. Calculate the percentage change in quantity and the percentage change in price b. Compute your price elasticity of demand of widgets. c. What can you say about your price elasticity of demand of widgets? Why? d. Is it a sound plan to increase the price of widgets?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Price elasticity of demand = Percentage change in demand/Percentage change in price

Percentage change in demand = Q2-Q1/(Q2+Q1/2) = 15-25/(15+25/2) = -10/20 = -0.5

Percentage change in price = P2-P1/(P2+P1/2) = 9-7/(9+7/2) = 2/8 = 0.25

Price elasticity of demand = 0.5/0.25 = 2

As the elasticity is greater than 1 so the price elasticity of demand for widgets is elastic

No,it is not a sound plan to increase the price of widgets as the demand being elastic,the increase in price will cause the total revenue to decrease.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose that when the price of water rises by 30 percent, the quantity demanded falls by...
Suppose that when the price of water rises by 30 percent, the quantity demanded falls by 10 percent. The price elasticity of demand for water is ____________, making water an _______________ good (in this example).
When the price of a cruise rises from $19,500 to $20,500​, the quantity demanded decreases from...
When the price of a cruise rises from $19,500 to $20,500​, the quantity demanded decreases from 2,100 to 1,900 travelers. Use this information to calculate the price elasticity of demand. The percentage change in the price of a cruise is——？ The percentage change in the quantity of cruises demanded is ——？percent. ​>>> Report your answer as a positive number. The price elasticity of demand for cruises is——?
If the price of tomatoes rises from 7 SAR per kg to 9 SAR per kg,...
If the price of tomatoes rises from 7 SAR per kg to 9 SAR per kg, the quantity demanded decreases from 1000 boxes to 600 boxes. Calculate the price elasticity of demand over this price range. Is the demand for tomatoes elastic or inelastic? (Solve step by step)
When the price of doodads falls from $16 to $10 the quantity of doodads demanded rises...
When the price of doodads falls from $16 to $10 the quantity of doodads demanded rises from 150 to 160 units. a) Compute and categorize the elasticity of demand of doodads. b) Interpret the number you calculated in part (a) for the elasticity of demand for doodads. c) If the government placed an excise tax on doodads, who would pay the majority of that tax: consumers or firms? Explain verbally (no graph required).
1.If price rises by 20% and quantity demanded of rice falls by 100 pounds, the elasticity...
1.If price rises by 20% and quantity demanded of rice falls by 100 pounds, the elasticity of demand is : (1 point) a. greater than 1 b. equal to -5 c. equal to -20 d. cannot be determined without additional information. 2.If quantity supplied responds only slightly to a change in price, then: (1 point) a. Supply is elastic b. An increase in price will shift the supply curve to a large extent c. Supply is inelastic d. Supply is...
A measure of the rate of percentage change of quantity demanded with respect to price, holding...
A measure of the rate of percentage change of quantity demanded with respect to price, holding all other determinants of demand constant is a. Income elasticity of demand b. Own price elasticity of demand c. Price elasticity of market equilibrium d. Cross price elasticity of demand The value of the income elasticity of demand coefficient for Good X is  given as 0.1. This means that a. as income increases by 10 percent, quantity demanded rises by 1 percent. b. as income...
1.Price elasticity of demand is defined as: Multiple Choice a.the slope of the demand curve. b.the...
1.Price elasticity of demand is defined as: Multiple Choice a.the slope of the demand curve. b.the slope of the demand curve divided by the price. c.the percentage change in price divided by the percentage change in quantity demanded. d.the percentage change in quantity demanded divided by the percentage change in price. 2. The Midpoint Method for Elasticity uses which of the following? Multiple Choice a.Average percentage change in price only b.Average percentage change in quantity only c.Average percentage change in...
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....
1. Adusei Incorporated reduces the price of their widgets from $25 to $18 and as a...
1. Adusei Incorporated reduces the price of their widgets from $25 to $18 and as a result, the quantity sold increases from 500 units a day to 650. The elasticity of demand for this company's widgets is: 2. The price of gas increases by 14% and as a result, gas sales fall by 3%. 2.1.   What is the elasticity of demand for gas at this point? **Round to 2 digits behind the decimal. The price of gas increases by 14%...
If, as the price of good Y rises from $5.00 to $5.75, the quantity demanded of...
If, as the price of good Y rises from $5.00 to $5.75, the quantity demanded of good Y falls from 54 units to 48 units, price elasticity of demand for good Y in this price range is Question 7 options: a) 0.84. b) 0.37. c) 1.05. d) 4.77. e) 1.19.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT