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 9, Problem 9.2IP
To determine
The responses of the beer distributors and snack food vendors on the legalization of marijuana.
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i) Suppose that new entry decreased your demand elasticity from –2 to –3 (made demand more elastic). By how much should you adjust your price of GHS10?
ii)The pricing model for iTunes has been to price songs individually. Instead, Pandora opted to offer unlimited song playing for a monthly fee. Would Pandora’s pricing model likely yield more profit than pricing songs individually?.
Suppose that a new entry has decreased your demand elasticity from –2 to –3 (made demand more elastic) and that your price, before the new entry, was $30.
You should adjust your price to ________ due to the new entry and decreased demand elasticity.
What if a new restaurant entry increased consumer elasticity of demand for the sushi appetizer from 2 to 3? The price you charge initially was $10. By how much do you have to adjust the price? Will you still be able to make a profit?
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Managerial Economics: A Problem Solving Approach
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