Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 2, Problem 17PAA
To determine
To find:
The prices of the products sold by G.R. Dry Foods.
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G.R. Dry Foods Distributors specializes in the wholesale distribution of dry goods, such as rice and dry beans. The firm’s manager is concerned about an article he read in this morning’s The Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by 10 percent over the next year. While the manager is pleased to see this group of individuals doing well, he is concerned about the impact this will have on G.R. Dry Foods.What do you think is likely to happen to the price of the products G.R. Dry Foods sells? Why?
The price will increase, because dry beans and rice are normal goods.
The price will increase, because dry beans and rice are inferior goods.
The price will decrease, because dry beans and rice are inferior goods.
The price will decrease, because dry beans and rice are normal goods.
You are the manager of medium-sized company that assembles personal computers in Ghana. You purchased most components such as random access memory (RAM), which is an input for your personal computers, on a competitive market. Based on your marketing research, consumers view personal computers in the Ghanaian market as a normal good. One morning, you picked up a copy of the Graphic Business, published by the Graphic Communications Group limited, and read an article indicating that the price of RAM have been increased effective the next day, forcing manufacturers to produce computers at a high unit cost. In addition, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession. Explain your answer with an appropriate diagram, how these events would affect the equilibrium price and quantity.
You are the manager of a train company. Recently total sales have been a bit low and you are now considering means to give sales a boost. Market research has shown that currently the price of train tickets is historically low. Market research has also shown that the demand curve for train tickets is downward sloping. You may assume that your company is not a price taker on the market.
i) One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why.
ii) She continues her argument by concluding that if the demand goes up, the total value of sales of train tickets should therefore increase. Do you agree with her? Explain why.
Chapter 2 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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