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a. Explain the main difference between the law of demand and price elasticity of demand.

a. Explain the main difference between the law of demand and price elasticity of demand.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 6PA: The price of coffee rose sharply last month, while the quantity sold remained the same. Five people...
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Question 1 a. Explain the main difference between the law of demand and price elasticity of demand. b. Use the price elasticity of demand to determine the elasticities of the following goods below: į Pfizer vaccine in the short run ii. Kitkat chocolate iii. Space travel (recently offered by Richard Branson) c. Explain why demand for Carmel cigarette tend to be more inelastic in the short run than in the long run. d. XYZ company specializes in supplying online sofa bed and wish to increase its total revenue. Based on the online data, XYZ company knows that its customers can be divided into two distinct markets: West coast Malaysia (WCM) and East coast Malaysia (ECM). The following table shows how the two regions respond to a 30% rebate: Volume of sales before West coast Malaysia East coast Malaysia the 30% rebate (sales per month) (sales per month) 500 300 Volume of sales after the 30% rebate 2000 400 į Using the midpoint method, calculate the price elasticities of demand for both regions. ii. If XYZ company wants to boost its sales and income, should the rebate be offered to West coast Malaysia or East coast Malaysia, or both regions, of neither regions? Justify your answer.
Transcribed Image Text:Question 1 a. Explain the main difference between the law of demand and price elasticity of demand. b. Use the price elasticity of demand to determine the elasticities of the following goods below: į Pfizer vaccine in the short run ii. Kitkat chocolate iii. Space travel (recently offered by Richard Branson) c. Explain why demand for Carmel cigarette tend to be more inelastic in the short run than in the long run. d. XYZ company specializes in supplying online sofa bed and wish to increase its total revenue. Based on the online data, XYZ company knows that its customers can be divided into two distinct markets: West coast Malaysia (WCM) and East coast Malaysia (ECM). The following table shows how the two regions respond to a 30% rebate: Volume of sales before West coast Malaysia East coast Malaysia the 30% rebate (sales per month) (sales per month) 500 300 Volume of sales after the 30% rebate 2000 400 į Using the midpoint method, calculate the price elasticities of demand for both regions. ii. If XYZ company wants to boost its sales and income, should the rebate be offered to West coast Malaysia or East coast Malaysia, or both regions, of neither regions? Justify your answer.
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