percentage change in quantity demanded E = 0.5 (in absolute value) percentage change in price According to the elasticity computation for popcorn of 0.5, by how much would popcorn sales fall if the price increased by: a. 40 percent? b. 30 percent? Degree of Elasticity Relatively elastic (E > 1) Airline travel, long run Estimate 2.4 Fresh fish 2.2 2 New cars, short run 1.5 Roughly unitary elastic (E = 1) Private education 1.1 Radios and televisions 1.2 Shoes 0.9 Relatively inelastic (E <1) Cigarettes 0.4 Coffee 0.3 Gasoline, short run 0.2 Long-distance telephone calls 0.1 a. By how much would coffee sales decline if the price of coffee increased 10 percent? b. If your local coffee shop raised its coffee prices by the same amount (10 percent), would sales decline by more, less, or the same amount as calculated in part a?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
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Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
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Chapter3: Demand Analysis
Section: Chapter Questions
Problem 8E: The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per...
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percentage change in quantity demanded
E
= 0.5 (in absolute value)
percentage change in price
According to the elasticity computation for popcorn of 0.5, by how much would popcorn sales fall if the price
increased by:
a. 40 percent?
b. 30 percent?
Degree of Elasticity
Relatively elastic (E > 1)
Airline travel, long run
Estimate
2.4
Fresh fish
2.2
2
New cars, short run
1.5
Roughly unitary elastic (E = 1)
Private education
1.1
Radios and televisions
1.2
Shoes
0.9
Relatively inelastic (E <1)
Cigarettes
0.4
Coffee
0.3
Gasoline, short run
0.2
Long-distance telephone calls
0.1
a. By how much would coffee sales decline if the price of
coffee increased 10 percent?
b. If your local coffee shop raised its coffee prices by the
same amount (10 percent), would sales decline by more,
less, or the same amount as calculated in part a?
Transcribed Image Text:percentage change in quantity demanded E = 0.5 (in absolute value) percentage change in price According to the elasticity computation for popcorn of 0.5, by how much would popcorn sales fall if the price increased by: a. 40 percent? b. 30 percent? Degree of Elasticity Relatively elastic (E > 1) Airline travel, long run Estimate 2.4 Fresh fish 2.2 2 New cars, short run 1.5 Roughly unitary elastic (E = 1) Private education 1.1 Radios and televisions 1.2 Shoes 0.9 Relatively inelastic (E <1) Cigarettes 0.4 Coffee 0.3 Gasoline, short run 0.2 Long-distance telephone calls 0.1 a. By how much would coffee sales decline if the price of coffee increased 10 percent? b. If your local coffee shop raised its coffee prices by the same amount (10 percent), would sales decline by more, less, or the same amount as calculated in part a?
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