CASE STUDY 2 The continuous surge in oil prices in 2007 and 2008 saw a sharp rise in the cost of living globally. One of the most alarming consequences was the rise in the price of food items. The concept of elasticity played an integral role in the changes that occurred in purchasing patterns. Additionally, firms had to make critical decisions regarding pricing policies. Table 1 below provides information on a select item bought by consumers in a hypothetical economy. PRICE OF POTATOES QUANTITY OF ($ per Ib) POTATOES 16 4 12 8 a) Using your knowledge from Finite Math, show that the price-demand function is p(x) = -0. 5x + 10 b) Calculate the elasticity of demand for sugar. c) Are potatoes elastic, unitary or inelastic in this price range? (HINT: Try about 3 prices in the price- range)

Calculus: Early Transcendentals
8th Edition
ISBN:9781285741550
Author:James Stewart
Publisher:James Stewart
Chapter1: Functions And Models
Section: Chapter Questions
Problem 1RCC: (a) What is a function? What are its domain and range? (b) What is the graph of a function? (c) How...
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COMMON FORMULAS:
1. т
y2-y1
X2-X1
2. у — тх +b
-pf'(p)
3. Е (p)
f(p)
Transcribed Image Text:COMMON FORMULAS: 1. т y2-y1 X2-X1 2. у — тх +b -pf'(p) 3. Е (p) f(p)
CASE STUDY 2
The continuous surge in oil prices in 2007 and 2008 saw a sharp rise in the cost of living globally. One
of the most alarming consequences was the rise in the price of food items. The concept of elasticity
played an integral role in the changes that occurred in purchasing patterns. Additionally, firms had to
make critical decisions regarding pricing policies. Table 1 below provides information on a select item
bought by consumers in a hypothetical economy.
PRICE OF POTATOES
QUANTITY OF
($ per Ib)
РОТАТОES
2
16
4
12
6.
8.
a) Using your knowledge from Finite Math, show that the price-demand function is
Р(x) — —0.5х + 10
b) Calculate the elasticity of demand for sugar.
c) Are potatoes elastic, unitary or inelastic in this price range? (HINT: Try about 3 prices in the price-
range)
Transcribed Image Text:CASE STUDY 2 The continuous surge in oil prices in 2007 and 2008 saw a sharp rise in the cost of living globally. One of the most alarming consequences was the rise in the price of food items. The concept of elasticity played an integral role in the changes that occurred in purchasing patterns. Additionally, firms had to make critical decisions regarding pricing policies. Table 1 below provides information on a select item bought by consumers in a hypothetical economy. PRICE OF POTATOES QUANTITY OF ($ per Ib) РОТАТОES 2 16 4 12 6. 8. a) Using your knowledge from Finite Math, show that the price-demand function is Р(x) — —0.5х + 10 b) Calculate the elasticity of demand for sugar. c) Are potatoes elastic, unitary or inelastic in this price range? (HINT: Try about 3 prices in the price- range)
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