Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 2.4P
A sporting goods store has estimated the
- a. Calculate demand elasticity using the midpoint formula between points A and B, between points C and D, and between points E and F.
- b. If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P × Q before and after the price change)? Repeat the exercise for initial prices being decreased to $40 and $20, respectively.
- c. Explain why the answers to a. can be used to predict the answers to b.
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Problem 6: Suppose that your demand schedule for DVDs is as follows:
Price
Quantity Demanded
Income = Rs. 20000
Quantity Demanded
Income = Rs. 24000
Rs. 18
80 DVDs
100 DVDs
20
70
90
24
55
60
28
35
40
32
24
28
Use the midpoint method to calculate your price elasticity of demand as the price of
DVDs increases from Rs.24 to Rs.28 if (i) your income is Rs.20000 and (ii) your income is
Rs.24000.
Calculate your income elasticity of demand as your income increases from Rs. 20,000 to $24,000 if (i) the price is Rs.18 and (ii) the price is Rs.20.
Suppose that your demand schedule for DVDs is as follows:
Price
Quantity Demanded
(income - $10,000)
$8
40 DVDs
10
32
12
24
14
16
16
B
Quantity Demanded I
(income-$12,000)
50 DVDs
45
30
20
12
a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs increases
from $12 to $16 if (i) your income is $10,000 and (ii) your income is $12,000.
b. Calculate your income elasticity of demand as your income increases from $10,000 to $12,000 if (i) the
price is $10 and (ii) the price is $14.
c. Is the DVDs normal good or inferior good?
A sporting goods store has estimated the demand curve for a popular brand of running shoes as a function of price. Use the diagram to answer the questions that follow.
Calculate demand elasticity using the midpoint formula between points A and B, between points C and D, and between points E and F.
If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P * Q before and after the price change)? Repeat the exercise for initial prices being decreased to $40 and $20, respectively.
Chapter 5 Solutions
Principles of Economics (12th Edition)
Ch. 5 - Prob. 1.1PCh. 5 - Prob. 2.1PCh. 5 - Prob. 2.2PCh. 5 - Using the midpoint formula, calculate elasticity...Ch. 5 - A sporting goods store has estimated the demand...Ch. 5 - For each of the following scenarios, decide...Ch. 5 - For the following statements, decide whether you...Ch. 5 - Taxicab fares in most cities are regulated....Ch. 5 - Studies have fixed the short-run price elasticity...Ch. 5 - Prob. 2.9P
Ch. 5 - Prob. 2.10PCh. 5 - Prob. 2.11PCh. 5 - [Related to the Economics in Practice on p. 99] At...Ch. 5 - Prob. 3.2PCh. 5 - Prob. 4.1PCh. 5 - Prob. 4.2PCh. 5 - The cross-price elasticity values for three sets...Ch. 5 - Prob. 4.4PCh. 5 - World famous Burpee Beer is brewed in the small...Ch. 5 - Prob. 5.2P
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