An elasticity of what would be required to offset a 12.5% price reduction in a 40% contribution margin situation? 1)-3.64 2) -2.00 3)-3.33 4) -1.00
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- In your country, the demand curve of a litre of petrol is given by: P = 107 - 5QD. Due to political unrest coupled with the slow recovery from pandemic, the global price of petrol surged which led to an increase of price per litre of petrol in your country from TK55 to TK80. After the price rise, the employees of the company you work for demanded a pay-raise. Your employer, hence, increased your income from 31033 taka to 46187 taka. The new demand curve at the new income level is P = 132 - 5QD. A). Calculate the income elasticity of demand (YED). B) Now assume that the increase in income (and the subsequent shift of the demand curve) had occured before the rise in price, then what would the YED be?The demand for electricity in the Lake Woebegon region is Qd(p) = 100−10p. Quantity is measured in GWh per year and price in monetary units (MU) per GWh. The consumer price of electricity consists of the price of electricity, which can be bought in the competitive electricity market at 2 MU/GWh, and the transmission price. The transmission of electricity from sellers to buyers is provided by the PowerGrid Corporation. The annualized cost of maintaining a power grid with a transmission capacity of k GWh is c(k) = 30 + k MU. What is the transmission capacity, consumer price of electricity, yearly consumer surplus, PowerGrid’s profit, and total surplus, in each of the following cases? (a) PowerGrid Corp sets the price of transmission to maximize profits. (b) PowerGrid Corp sets the price of transmission to maximize total welfare, subject to the constraint that it cannot make a loss. (c) The fixed costs of maintaining transmission capacity increase a little bit. What kind of impact does…Given the Supply chain cost for a service is PKR 195 and the customer value is PKR 225. Determine supply chain surplus and consumer surplus.
- . The monthly demand for trotro rides in Kumasi, Ashanti depends on the price of a taxi ride, the price of a trotro ride, and the average monthly income of riders. Some consumers might choose to ride the taxi instead of the trotro, while other riders might use both forms of transportation to get to their final destination. The demand function for trotro rides is: Qd = 9,750 – 500P + 250Pj + 5INCOME, where Qd is the number of trotro rides demanded per month, P is the price of a ride, Pj is the price of a taxi ride, and INCOME is the average monthly income of riders. Suppose that P = $1.50, Pj = $4, and INCOME = $3,000. What is the monthly quantity of trotro rides demanded? What is the value of the cross-price elasticity of demand? Based on your answer, are taxi rides and trotro rides substitutes or complements? What is the value of the income elasticity of demand? Based on your answer, are taxi rides an inferior or a normal good?On September 2, 2021, the Malaysian government set a ceiling retail price of RM19.90 for COVID-19 Self-Test Kit, which would take effect on September 5, 2021. Discuss the advantages and disadvantages of the policy.An airline company determines the price of a seat on a particular route between city A and city B to be p = 200 + 0.02n, where p is the airfare price in euro and n is the number of airplane seats sold per day. The travel demand for this route by air has been found to be n = 4700 – 20p a)Determine the equilibrium price charged and the number of seats sold per day, and the resulting revenues of the company.
- A local restaurateur who had been running a profitable business for many years recently purchased a three-way liquor license. This license gives the owner the legal right to sell beer, wine, and spirits in her restaurant. The cost of obtaining the three-way license was about $90,000, since only 300 such licenses are issued by the state. While the license is transferable, only $75,000 is refundable if the owner chooses not to use the license. After selling alcoholic beverages for about one year, the restaurateur came to the realization that she was losing dinner customers and that her profitable restaurant was turning into a noisy, unprofitable bar. Subsequently, she spent about $8,000 placing advertisements in various newspapers and restaurant magazines across the state offering to sell the license for $80,000. After a long wait, she finally received one offer to purchase her license for $77,000. What is your opinion of the restaurateur’s decisions? Would you recommend that she accept…Payless Shoe Source sees a 35 per cent increase in sales of its athletic shoesduring a 1 week, half-price sale.Recently, an Internet service provider (ISP) in the United Kingdom implemented a “no-strings U.S.-style flat-rate plan” whereby its commercial subscribers can send and receive unlimited volume (measured in gigabytes) up to a cap of 10,000 gigabytes (per month) via their broadband Internet service for a flat monthly fee of £399.99. Under the old “metered plan,” Alistair Willoughby Cook sent and received a grand total of 3,500 gigabytes over his broadband connection and paid £399.99 in usage fees in a typical 30-day month. If all customers are exactly like Alistair, what is the impact of the flatrate plan on consumer welfare and the company’s profits? Explain.
- Burlington Motor Carriers, a trucking company, is considering the installation of a two-way mobile satellite messaging service on its 2,000 trucks. From tests done last year on 120 trucks, the company found that satellite messaging could cut 60% of its $5 million bill for long-distance communications with truck drivers. More importantly, the drivers who used this system reduced the number of "deadhead" miles-those driven without paying loads-by 0.5%. Applying that improvement to all 230 million miles covered by the Burlington fleet each year would produce an extra $1.25 million in savings. Equipping all 2,000 trucks with the satellite hookup will require an investment of $8 million and the construction of a message-relaying system costing $2 million. The equipment and onboard devices will have a service life of eight years and negligible salvage value; they will be depreciated under the five-year MACRS class. Burlington's marginal tax rate is about 38%, and its required minimum…Johnny's company provides a on-call service to provide garden maintenance / tidying services in several residential areas at a regular price of $ 400, covering maintenance / trimming and spraying of fertilizers and chemical pests. In an effort to attract new customers, the company offered its customers a $ 80 discount off the regular price. It turned out that this decision was greeted enthusiastically and customers increased to 5,500 units (packages) from 3500 units recorded in the same period last year. Question: a. Compute: Arc price elasticity of demand for service company “ABC”. b. It is assumed that the Arc price elasticity in item a is the best available estimate of the Point price elasticity of demand. If the marginal cost is $ 150 per unit for labor and materials. Compute: Optimal mark-up on price, and Optimal price for Johnny's company services.A store that sells maize meal discovers that when the price of 1kg maize meal Is R24 per kilogram, the quantity demanded is 306 kgs per week. When the price decreases to R21 per kg, then the sales increase to 340 kgs per week.