Econ - Week 7 Chapter 11 Self Test

Problem 03-06 (algo) You are the manager of a firm that receives revenues of $40,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between product Yand X is -1.8. How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 1 percent? Instructions: Enter your response rounded to the nearest dollar. If you are entering a negative number, be sure to use a (-) sign. GA

24. The seafood restaurant you manage has daily specials. You have observed that the fresh salmon is overstocked and you want to increase salmon sales by 30%. You know the price elasticity of demand for salmon is -1.2. How much (and in what direction) should you change salmon prices to increase sales by 30%? Will this increase or decrease total salmon revenue? How do you know? You also know that fresh salmon and fresh tuna have a cross price elasticity of +.5. With the percentage decrease in salmon prices calculated above, how much more/less fresh tuna will you sell? Are salmon and tuna complements or substitutes at your restaurant?

LawnTech sells its laser hedge trimmer at a price of $275, and estimates price elasticity of demand at -3.9 at this price. LawnTech is thinking about raising its price by +4.0%. By what percent will Quantity sold change, given this change in price? Report your answer as a percent. Report 25.5%, for example, as "25.5". Remember to report the sign of the change. Rounding: tenth of a percent. Your Answer: Answer

1. Suppose for some firm, 14 units were sold at the initial price of $33 and after the price rose, 10 units were sold at the new price of $39. Compute the price elasticity of demand and interpret the result. 2. Returning to your computation in #1, will revenue have increased or decreased as a result of that price change? On the basis of this information do we know enough to assess whether the price change was a wise decision for the firm? Explain. 3. Ben purchased 12 gallons of gasoline each day. When the price of gasoline was $2.80 per gallon, Ben purchased 12 gallons of gasoline. When the price of gasoline fell to $2.10 per gallon, Ben purchased 12 gallons of gasoline. Use price elasticity of demand to describe Ben’s demand for gasoline. What does Ben’s demand curve for gasoline look like?

Your firm’s research department has estimated the income elasticity of demand for non fed ground beef to be -1.94. You have just read in the Wall Street Journal that due to an upturn in the economy, consumer incomes are expected to rise by 10 percent over the next three years. As a manager of a meat-processing plant, how will this forecast affect your purchases of non fed cattle?

5   In a discussion with your friend, LeeAnna, you mentioned you have studied Price Elasticity of Demand (PED) as well as the various costs that impact production. LeeAnna, who happens to own a Pizza store is worried about the declining profitability of her store. She needs your advice on what she should do to increase her profit. Provide good economic advice to LeeAnna, using the concepts you have learned from your chapters 1 - 6 (especially paying close attention to PED and production costs). In your advice, put into consideration the nature of her competition, what variables impact the profit of an organization, and which of these variable(s) can the business owner control to increase profit? How can the PED of a product, in this case, pizza, impact how much price the owner of the store can change?

The demand schedule of the product is given below   Price $ (P) Quantity (Q) 100 1 90 2 80 3 70 4 60 5 50 6 40 7 30 8 20 9 10 10   Calculate the arc price elasticity as the price decrease from 40 to 30$ and interpret the result. What are the determinants of price elasticity of demand?

Your firm’s research department has estimated the income elasticity of demand for nonfed ground beef to be −1.94. You have just read in The Wall Street Journal that due to an upturn in the economy, consumer incomes are expected to rise by 10 percent over the next three years. As a manager of a meat-processing plant, how will this forecast affect your purchases of nonfed cattle?

2: The price elasticity of demand for Nanay Flor's Photography is 0.5. If the %AQ=10%. What is the %AP? Why do you think nanay flor's service is inelastic? How can she maximize profit? 3: Mamon's bakery is famous for its Banana muffins. If they will increase the price from P10 to P15 and the price elasticity of supply is 1.5. How much will the %AQ? Suggest ways to maximize profit. 4: Company X developed a mobile application that could track monthly expenses of households. If the launching price is P500 and due to good response from the market the company strategist suggested to increase the price to P700.lf the %AQ= 30%. As the CEO, will you approve the price increase?

When a certain brand of dog food sells for $20 per bag, 10,000 units are sold; when the price changes to $22, 7000 units are sold. Calculate price elasticity of demand for the dog food, carefully folowing all numeric instructions. Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary; if you round on intermediate steps, use four places.

Problem 06-07 (algo) ADVAN CED ANALYSIS Currently, at a price of $0.50 each, 250 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $0.50 to $1 is unit-elastic (Es= 1). In the long run, a price increase from $0.50 to $1 has an elasticity of supply of 1.50. (Hint: Apply the midpoint approach to the elasticity of supply.) Instructions: Enter your answers as a whole number. a. How many popsicles will be sold each day in the short run if the price rises to $1 each? popsicles b. How many popsicles will be sold per day in the long run if the price rises to $1 each? popsicles

Disney just raised its 3 day 3 park pass from $110.00 to $121.00. Sales fell from 4,000 per week to 3,000 per week.     Calculate the price elasticity of demand using the arc elasticity of demand formula.             Is demand elastic or inelastic? Why?             Did Disney management do the right thing? Why?             What should they do next?

Price Quantity (dollars per demanded bushel) (bushels) 8 2,000 7 4,000 6 6,000 8,000 4 10,000 3 12,000 The table above gives the demand schedule for snow peas. The price elasticity of demand increased from $6.00 to $7.00 per bushel is (please use point elasticity of demand in your calculation) O 1.0. • 2.0. 2.6. 5.0.

2. PR sells phones for £400 and has observed a recent drop in sales from 1,500 units a month, reducing its revenue by £120,000. This has occurred because a competitor has just reduced its price by 20%. PR wants to restore its sales volume to its previous level, and has estimated its price and cross elasticities at -1.4 and 0.8 respectively. The phones have a marginal cost of £280. a) Calculate the sales level of PR after the reduction in the competitor's price, assuming PR maintains its price. b) Calculate the necessary price for PR to charge to achieve its objective, assuming the competitor's price reduction. c) Calculate the effects of the decisions in a) and b) above on profit compared with the original profit before the drop in sales. Which is the better decision?

An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase production from 125 bags per minute to 145 bags per minute. What do we know about the elasticity of supply?   Question 23 options:   It is 0.40 and supply is elastic.   It is 2.48 and supply is elastic.   It is 2.48 and supply is inelastic.   It is 0.40 and supply is inelastic.

Daffy’s is a pet care company that recently increased the average price of its services by 5%. As a result, the number of customers dropped by 4%.  Based on this information, what is the price elasticity of demand for services at Daffy’s?  How will this 5% increase of the average price of services impact total revenue at Daffy’s?   Buffy’s, a pet adoption company, opens up right next door to Daffy’s.  How will this likely impact the demand for services at Daffy’s?   Bufasthar, another pet care company in the area that competes with Daffy’s decided to increase the average price of its services by 3%. How will this decision likely impact the demand for services at Daffy’s?   Assume that the average disposable income in the area in which it operates decreased by 4% over the last year. As a result, the number of customers at Daffy’s decreased by 3%.  Based on this information, what is the income elasticity of demand for services at Daffy’s? Are pet care services at Daffy’s considered…

Price (dollars) 8 7 D. 5 10 15 20 25 30 35 Quantity (units per year) In the figure above, when the price falls from $8 to $7, total revenue A) decreases from $210 to $120 so demand is inelastic. B) increases from $120 to $210 so demand is inelastic. C) decreases from $210 to $120 so demand is elastic. D) increases from $120 to $210 so demand is elastic. 6

discuss how elasticity of demand impacts a company’s decisions to change prices on their products. How does price elasticity of demand work, and what tests or other data do companies need to consider as they use elasticity in their financial and business decision making? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

Exercise 2.   The demand curve for a product is given Qd = 1500 − 5Px − 0.2Pz by where Pz = $300. What is the own-price elasticity of demand when Px = $200? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price below $200? What is the own-price elasticity of demand when Px = $125? Is demand elastic or inelastic at this price? What would happen to the firm’s revenue if it decided to charge a price above $125? What is the cross-price elasticity of demand between good X and good Z when Px =$125? What about when Px = $200? Are goods X and Z substitutes or complements?

4) Your company has just manufactured a new product. What will be your advise to management if demand for the product is a) Elastic b) Inelastic

Explain it early

Question 1 The Potomac Range Corp manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac's closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomac's oven and the competitive Spring City model? Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is -3.0, what price would Potomac have to charge to sell the same number of unit it did before the Spring City price cut?

Practice #6   Francine is a a dental floss tycoon living in Montana.  She faces the following demand curve for her product:  Price ( in $/unit)          Quantity demanded  2.50                            1000  2.20                            2000  1.90                            3000  1.60                            4000  1.30                            5000  1.00                            6000   .70                             7000   .40                             8000  Francine has been told by her brother, who is currently taking a marketing class, that if she lowers her price by one increment(for example; changing price from .70 to .40, she will capture market share and increase total revenue.  All of her advisors within the company have assured Francine that her brother's advice may be correct, BUT the above demand curve will not change.  Assume that Francine knows the above demand curve will not change and is also considering her brother's advice.  The prices can only change in…