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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Question
Chapter 6, Problem 7MC
To determine
The relationship between complementary goods.
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A taco hut is trying to determine its demand if it changes it's price. In 2019, they sold tacos for 1.00 and
sold 6,000. In 2020, they increase the price of tacos to 1.50 and demand dropped to 5,500. In 2021, the
owners of the taco hut want to increase taco price to 2.00 dollars. What would demand be for 2021?
What if they lowered the price to .50, how much would demand be?
Why may a company intentionally limit supply when consumers want more of a product?
a. How much would the firm’s revenue change if it lowered price from $12 to $10? Is demand elastic or inelastic in this range?
Revenue change: $
Demand is in this range.
b. How much would the firm’s revenue change if it lowered price from $4 to $2? Is demand elastic or inelastic in this range?
Revenue change: $
Demand is in this range.
c. What price maximizes the firm’s total revenues? What is the elasticity of demand at this point on the demand curve?
Price that maximizes total revenues: $
Demand is at this point.
Chapter 6 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- A good will have a more inelastic demand Select one: a. if it is considered a necessity. b. the greater the availability of close substitutes. c. the longer the period of time. d. the narrower the definition of the market.arrow_forwardThe demand curve for cameras is Q=400-2P where P is the price of a camera and Q is the number of cameras sold per week. Answer the following questions.A. If the vendor has been selling 120 cameras per week, how much revenue has she been collecting?B. What is the price elasticity of demand for cameras?C. Does the law of demand hold?D. If the vendor wants to generate more revenue, should she raise or lower the price of cameras?arrow_forwardthe demand curve is horizontal, what would customers do when price increases?arrow_forward
- Draw a supply and demand curve for cheeseburgers. Cattle farmers created a supplement to give to their cows that make them grow twice as large, what happens to the supply or demand of cheeseburgers? Why?arrow_forwardConsider the supplier of a product that is an inferior good. For instance, an aluminum supplier for a canned goods producer. During a recession during which average incomes fall, which of the following best describes what would happen to the profit-maximizing price of the supplier? a. The supplier’s profit-maximizing price would decrease due to an increase in demand. b. The supplier’s profit-maximizing price would increase due to an increase in demand. c. The supplier’s profit-maximizing price would decrease due to a reduction in demand. d. The supplier’s profit-maximizing price would increase due to a reduction in demand.arrow_forwardA change in the price of a product will cause: Select one: a. a shift in the supply curve b. a change in quantity supplied c. a change in demand for a product d. a change in consumer preferences Which of the following products is most likely to have an elastic demand? Select one: a. cigarettes b. toothpicks c. automobiles d. insulin Refer to the below information. Equilibrium price will be Select one: a. $2 b. $1 c. $4 d. $3arrow_forward
- draw a general demand curve and label it D. Then shift the curve to the left or the right depending on what will happen to the demand for beef. Draw an arrow showing direction and label your new curve D1. Then tell me the determinant of demand that shifted the curve. 10. Chicken prices risearrow_forwardQUESTION TWo. Suppose the Daily Graphic Newspaper estimates that if it raises the price of its newspaper from Ghc1.00 to Ghc1.50 then the number of subscribers will fall from 50,000 to 40,000. a. What is the price elasticity of demand for the Daily Newspaper when elasticity is calculated using the midpoint method? b. What is the advantage of using the midpoint method? c. If the Daily Newspaper's only concern is to maximize total revenue, should it raise the price of a newspaper from Ghc1.00 to Ghc1.50? Why or why not? d. Suppose there is an increase in consumers' incomes. In the market for automobiles (a normal good), does this event cause an increase in demand or an increase in quantity demanded? Does this cause an increase in supply or an increase in quantity supplied? (Explain. NB: Explanation must not be more than half a page.) e. Suppose there is an advance in the technology employed to produce automobiles. In the market for automobiles, does this event cause an increase in supply…arrow_forwardThe price of guacamole, a complement for tacos, increases. What happens in the market for tacos? Supply decreases Supply increases Demand decreases Demand increasesarrow_forward
- How does the equilibrium price and quantity change when here are bad rumors about a product? Are there any changes or none? Provide a graph of your answerarrow_forwardPlayStation 3 and XBOX 360 are substitutes. If the price of PlayStation 3 increases what will happen to the quantity demanded for XBOX 360? Select one: a. None of the above b. The quantity demand for XBOX 360 will not change c. The quantity demand for XBOX 360 will increase d. The quantity demand for XBOX 360 will decreasearrow_forwardPrice elasticity of demand is more likely to be greater than one if: A. consumers have a long time to adjust to a price change. B. the product is a necessity. C. demand is inelastic. D. there are few close substitutes for the product. E. total revenue declines in response to a price reduction.arrow_forward
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