Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 12, Problem 1MC
To determine
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When the promotion makes the
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Students have asked these similar questions
can u solve point d to i
d. What is the notation used for this limit value?
e. Calculate the limit value.
f. Find the point elasticity of demand for p = 1 and determine whether demand is (perfectly) inelastic, is (perfectly) elastic or has unit elasticity.
g. Use your answer to question f. to approximate the change in demand when the price of 1 is increased by 0.25%.
h. What can you derive from your answer to question f. about the change in revenue when the price is slightly increased starting from p=1?
i. Find the price level at which the demand has unit elasticity.
You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that
a. both the mayor and the city manager think that demand is elastic.
b. both the mayor and the city manager think that demand is inelastic.
c. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
d. the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
Aplia Homework: Elasticity of Demand and Supply
4. Determinants of the price elasticity of demand
Consider some determinants of the price elasticity of demand:
• The availability of close substitutes
• The proportion of a consumer's budget spent on the good
• The time horizon being considered
A good with many close substitutes is likely to have relatively
demand, because consumers can easily choose to purchase one of the close
substitutes if the price of the good rises.
A good's price elasticity of demand depends in part on how necessary it is relative to other goods. If the following goods are priced approximately the
same, which one has the least elastic demand?
O Sports car
O Chemotherapy for cancer patients
Price elasticity for a good depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the
most elastic demand?
O Thumbtacks
O Monthly cell phone bill
O Fish food
Chapter 12 Solutions
Managerial Economics: A Problem Solving Approach
Knowledge Booster
Similar questions
- The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?arrow_forwardIsabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?arrow_forwardThe price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.arrow_forward
- Suppose a university raises its tuition from 3,000 to 3,500. As a result, student enrollment falls from 5,000 to 4,500. Calculate the price elasticity of demand. Is demand elastic, unitary elastic, or inelastic?arrow_forwardIf the midpoint on a straight-line demand curve is at a price of $7, what can we say about the elasticity of demand for a price change from $12 to $10? What about from $6 to $4?arrow_forwardWhat are the major determinants of a products price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?arrow_forward
- A linear, downward-sloping demand curve is a. inelastic b. unit elastic. c. elastic. d. inelastic at some points, and elastic at others.arrow_forwardProve that price elasticity of demand is not the same as the slope of a demand curve.arrow_forwardA college raises its annual tuition from 23,000 to 24,000, and its student enrollment falls from 4,877 to 4,705. Compute the price elasticity of demand. Is demand for the college elastic or inelastic?arrow_forward
- Over time, technological advance increases consumers incomes and reduces the price of smartphones. Each of these forces increases the amount consumers spend on smartphones if the income elasticity of demand is greater tha____________ and if the price elasticity of demand is greater than_____________. a. zero, zero b. zero, one c. one. zero d. one, onearrow_forwardSuppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a. Calculate the price elasticity of demand between 90 and 110. b. Is the price elasticity of demand between 90 and 110 elastic, unit elastic, or inelastic? c. Will Erins total revenue rise if she increases the price from 90 to 110? d. Calculate the price elasticity of demand between 110 and 130. e. Is the price elasticity of demand between 110 and 130 elastic, unit elastic, or inelastic? f. Will Erins total revenue rise if she increases the price from 110 to 130?arrow_forwardPls question d,e and farrow_forward
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