A company's research team finds that the elasticity of demand for a particular item at price p is given by: E (p) = Compute the elasticity of demand at p = 15 and explain what should be done to 65-p increase revenue. The elasticity of demand atp = 15 is 0.3. This value indicates that the demand is inelastic, so a small increase in price will result in a small increase in revenue. Thus, the company should make a small increase the price. The elasticity of demand at p = 15 is (0.3. This value indicates that the demand is elastic, so a small increase in price will result in a small increase in revenue. Thus, the company should make a small increase the price. The elasticity of demand at p = 15 is 0.3. This value indicates that the demand is inelastic, so a small increase in price will result in a small decrease in revenue. Thus, the company should not increase the price. The elasticity of demand at p = 15 is 0.3. This value indicates that the demand is elastic, so a small increase in price will result in a small decrease in revenue. Thus, the company should not increase the price.

A company's research team finds that the elasticity of demand for a particular item at price p is given by: E (p) = Compute the elasticity of demand at p = 15 and explain what should be done to 65-p increase revenue. The elasticity of demand atp = 15 is 0.3. This value indicates that the demand is inelastic, so a small increase in price will result in a small increase in revenue. Thus, the company should make a small increase the price. The elasticity of demand at p = 15 is (0.3. This value indicates that the demand is elastic, so a small increase in price will result in a small increase in revenue. Thus, the company should make a small increase the price. The elasticity of demand at p = 15 is 0.3. This value indicates that the demand is inelastic, so a small increase in price will result in a small decrease in revenue. Thus, the company should not increase the price. The elasticity of demand at p = 15 is 0.3. This value indicates that the demand is elastic, so a small increase in price will result in a small decrease in revenue. Thus, the company should not increase the price.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....

See similar textbooks

Similar questions

The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?
(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
If automobiles and gasoline are complements, then their cross-elasticity coefficient is a. strictly greater than 1. b. positive. c. equal to zero. d. negative.
In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is 1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?
Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a. Calculate the price elasticity of demand between 90 and 110. b. Is the price elasticity of demand between 90 and 110 elastic, unit elastic, or inelastic? c. Will Erins total revenue rise if she increases the price from 90 to 110? d. Calculate the price elasticity of demand between 110 and 130. e. Is the price elasticity of demand between 110 and 130 elastic, unit elastic, or inelastic? f. Will Erins total revenue rise if she increases the price from 110 to 130?
Describe the general appearance of a demand or a supply tune with zero elasticity.
The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.