a. Based on these demand elasticity estimates, which fruit is most inelastically demanded? Which is most elastically demanded?b. For which of these fruits would a 10% drop in price cause an increase in total revenue from that sale of that fruit?c. If the government could offer “10% off” coupons for only three of these fruits, and it wanted to have the biggest possible effect on quantity demanded, which three fruits should get the coupons?d. Overall, the authors found that for the average fruit, the elasticity of demand was about -0.5. Is the demand for fruit elastic or inelastic? apple: -0.16banana: -0.42grapefruit: -1.02grapes: -0.91oranges: -1.14

Question
Asked Oct 2, 2019
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a. Based on these demand elasticity estimates, which fruit is most inelastically demanded? Which is most elastically demanded?

b. For which of these fruits would a 10% drop in price cause an increase in total revenue from that sale of that fruit?

c. If the government could offer “10% off” coupons for only three of these fruits, and it wanted to have the biggest possible effect on quantity demanded, which three fruits should get the coupons?

d. Overall, the authors found that for the average fruit, the elasticity of demand was about -0.5. Is the demand for fruit elastic or inelastic?

 

apple: -0.16

banana: -0.42

grapefruit: -1.02

grapes: -0.91

oranges: -1.14

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Expert Answer

Step 1

a.

The item which is most in-elastically demanded is the one with the least elasticity of demand value. From the given table, the item with the least elasticity of demand value is the Apples. Apples have the demand elasticity of -0.16 which is the least amongst the all provided. On the other hand, the item which has the highest elasticity value is the one which is most elastically demanded. In this case, it is the oranges which have a demand elasticity of -1.14.

Step 2

b.

The 10 percent decrease in the price will have highest increase in the demand for the commodity in which the elasticity of demand is higher. In this case, the fruit orange have the higher value of demand elasticity which is -1.14. Thus, it means that the 10 percent decline in price of orange will have more than 10 percent increase in demand and that means the highest increase in the total revenue from the sale of the fruit. The Grapefruits also has a higher elasticity of demand which is -1.02 means that the 10 percent decline in price of the grapefruits will also have higher than 10 percent increase in demand for the fruit and that means the grapefruits would also provide a higher increase in the total revenue from sale of the fruit just like the Oranges. Thus, Oranges and Grapefruits are the fruits that would provide higher increase in the total revenue due to a decline in price by 10 percent in the market.

Step 3

c.

When the government can offer a coupon that provides 10 percent off on the price of three fruits, it should be provided to those fruits which are more elastic. From the given information, it is identified that the fruits that has hig...

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