MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 6, Problem 6QE
To determine

Determine the values of price elasticity.

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According to data from the U.S. Department of Energy, sales of the fuel-efficient Toyota Prius hybrid fell from 194,108 vehicles sold in 2014 to 180,603 in 2015. Over the same period, according to data from the U.S. Energy Information Administration, the average price of regular gasoline fell from $3.36 to $2.43 per gallon. Using the midpoint method, calculate the cross-price elasticity of demand between Toyota Priuses and regular gasoline. According to your estimate of the cross-price elasticity, are the two goods complements or substitutes? Does your answer make sense?
Online the timing and tailoring of prices to specific products is the key to successful pricing in online markets. And " Thanks to the ready availability of data in online markets, a pricing manager can easily approximate the elasticity of demands for the different products it sells online." Assuming a 10 percent decrease in price increases sales by 30 percent, calculate the price elasticity of demand? If the wholesale price of the online product is $50 and sells at a price comparison site that charges $0.50 per click and boasts a conversation rate of 5 percent ( an average of 20 percent clicks are needed to generate sale), the incremental cost of each sale is $50. What price should you change for the product? What is the markup? B) . The authors assert that price sensitivity is affected by (1) product cycle, and (2) number of competitors. In fact, " When the number of competing sellers doubles, a firm's elasticity of demand is expected to double ( you should be able to verify this…
Q.3.1 A store that sells maize meal discovers that when the price of 1kg maize meal Is R24 per kilogram, the quantity demanded is 306 kgs per week. When the price decreases to R21 per kg, then the sales increase to 340 kgs per week. Use this information to answer questions Q.3.1.1 and Q.3.1.2 below. (5) Q.3.1.1 Determine the price elasticity of maize meal using the Arc method. Q.3.1.2 Discuss the relationship between the price elasticity of maize meal and the total revenue the store received from the sales. Advise the store on an appropriate pricing strategy. (7)
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How To Understand Elasticity (Economics); Author: Market Power;https://www.youtube.com/watch?v=1XXhpHJTglg;License: Standard Youtube License