[Related to Solved Problem #1] You own a hot dog stand that you set up outside the student union every day at lunch time. Currently, you are selling hot dogs for a price of $3, and you sell 30 hot dogs a day (point A on the diagram to the right). You are considering cutting the price to $2. The graph to the right shows two possible increases in the quantity sold as a result of your price cut. Use the information in the graph (new quantities are given on the horizontal axis) to calculate the price elasticity between these two prices on each of the demand curves. Use the midpoint formula to calculate the price elasticities. On the demand curve containing the points "A" and "B", the price elasticity of demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and enter your response rounded to two decimal places.) On the demand curve containing the points "A" and "C", the price elasticity of demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and enter your response rounded to two decimal places.) Enter your answer in each of the answer boxes. Price (dollars per hot dog) 0- 0 10 A C ID₁ 34 20 30 40 50 60 Quantity (hot dogs per day) B D2 muntanum 70 80

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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[Related to Solved Problem #1] You own a hot dog stand that you set up outside
the student union every day at lunch time. Currently, you are selling hot dogs for a
price of $3, and you sell 30 hot dogs a day (point A on the diagram to the right).
You are considering cutting the price to $2. The graph to the right shows two
possible increases in the quantity sold as a result of your price cut. Use the
information in the graph (new quantities are given on the horizontal axis) to
calculate the price elasticity between these two prices on each of the demand
curves. Use the midpoint formula to calculate the price elasticities.
On the demand curve containing the points "A" and "B", the price elasticity of
demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and
enter your response rounded to two decimal places.)
On the demand curve containing the points "A" and "C", the price elasticity of
demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and
enter your response rounded to two decimal places.)
Enter your answer in each of the answer boxes.
Price (dollars per hot dog)
0
10
с
ID ₁
60
20 30 40 50
Quantity (hot dogs per day)
B
D₂
:65
………………
70
80
Transcribed Image Text:[Related to Solved Problem #1] You own a hot dog stand that you set up outside the student union every day at lunch time. Currently, you are selling hot dogs for a price of $3, and you sell 30 hot dogs a day (point A on the diagram to the right). You are considering cutting the price to $2. The graph to the right shows two possible increases in the quantity sold as a result of your price cut. Use the information in the graph (new quantities are given on the horizontal axis) to calculate the price elasticity between these two prices on each of the demand curves. Use the midpoint formula to calculate the price elasticities. On the demand curve containing the points "A" and "B", the price elasticity of demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and enter your response rounded to two decimal places.) On the demand curve containing the points "A" and "C", the price elasticity of demand for a price cut from $3 to $2 is. (Hint: Include the negative sign and enter your response rounded to two decimal places.) Enter your answer in each of the answer boxes. Price (dollars per hot dog) 0 10 с ID ₁ 60 20 30 40 50 Quantity (hot dogs per day) B D₂ :65 ……………… 70 80
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