MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 11, Problem 20PAA
To determine
The pricing place that leads to increased profitability of the company.
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Harding Enterprises has developed a new product called the “Quest Simulator (QS)”. The market demand for this product is given as follows: Q = 240 - 4P.
If QS is priced at $40, what is the point price elasticity of demand? Is demand elastic or inelastic?
What is the maximum amount that consumers are willing to pay for the quantity demanded at the price of $40? (hint: it includes both the total expenditures and the consumer surplus)
If the price of QS is increased slightly from $40, what will happen to the total expenditure on the product? What will happen to the consumer surplus?
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Question 2. 7.
commissioned a study that showed the demand by fans for stadium seats (per playing
date) to be P- 22 - 0.2Q, where P is the average price of a ticket and Q represents the
number of seats (expressed in thousands). The local stadium seats a maximum of 56,000
per game. Suppose the owner offers you 10% of the revenues. If you can only choose a
uniform per-ticket price, what is the maximum amount you can carn per game? (Note:
Assume that all seats and all games are the same in this problem.)
The owner of a baseball team and local stadium has
9. Application: Elasticity and hotel rooms
The following graph input tool shows the daily demand for hotel rooms at the Big Winner Hotel and Casino in Las Vegas, Nevada. To help the hotel
management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand
factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.
Initial Value
Demand Factor
Average American household income
$50,000 per year
Roundtrip airfare from New York (JFK) to Las Vegas (LAS)
$200 per roundtrip
Room rate at the Lucky Hotel and Casino, which is near the Big Winner
$250 per night
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Graph Input Tool…
Chapter 11 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
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