Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
Bundle: Managerial Economics: Applications, Strategies And Tactics, 14th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
14th Edition
ISBN: 9781337198196
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
Question
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Chapter 3, Problem 10E

a)

To determine

To determine the price elasticity of demand for the year 2006 and 2007.

a)

Expert Solution
Check Mark

Answer to Problem 10E

The final result derived from the calculation for price elasticity of demand for the year 2006 and 2007 is -0.21.

Explanation of Solution

The price elasticity of demand for the year 2006 and 2007 can be calculated as follows:

  Percentage Change in Quantity DemandedPercentage change in price

% change in quantity demanded:

  =450525 ( 450+525 )2×100=75487.50×100=15.38%

% change in price:

  =800017200 ( 8000+17200 )2×100=920012600×100=73.02%

Price elasticity of demand:

  =15.3873.02=0.21

b)

To determine

To determine the income elasticity of demand for the year 2007 and 2008.

b)

Expert Solution
Check Mark

Answer to Problem 10E

The final result derived from the calculation for income elasticity of demand for the year 2007 and 2008 is -3.53.

Explanation of Solution

  Percentage change in quantity demandedPercentage change in income

% change in quantity demanded:

  =400450 ( 400+450 )2×100=50425×100=11.76%

% change in income:

  =590610 ( 590+610 )2×100=20600×100=3.33%

Income elasticity of demand:

  =11.763.33=3.53

c)

To determine

To determine the sales forecast for the year 2009.

c)

Expert Solution
Check Mark

Answer to Problem 10E

The final result derived from the calculation for sales forecast for the year 2009 is 316.

Explanation of Solution

  Q2=Q1(1+ED(%ΔP)+Ey(%ΔY)Q2=400(1+(0.21)(0)+(3.53)(0.06)Q2=316

Sales forecast for the year 2009 has been calculated against the income and price elasticities for the previous years and has been calculated as 316 that is a reduction when compared to the previous year.

d)

To determine

To determine the Sales for the year 2009, with an increase in the price and income levels.

d)

Expert Solution
Check Mark

Answer to Problem 10E

The final result derived from the calculation the Sales for the year 2009, with an increase in the price and income levels is 320.

Explanation of Solution

  Q2=Q1(1+ED(%ΔP)+Ey(%ΔY)Q2=400(1+(0.21)(0.06)+(3.53)(0.06)Q2=320

Sales forecast for the year 2009 has been calculated against the income and price elasticities for the previous years and has been calculated as 320 that is a reduction when compared to the previous year.

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