EBK ESSENTIALS OF ECONOMICS
4th Edition
ISBN: 8220103647380
Author: KRUGMAN
Publisher: MAC HIGHER
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Chapter P2, Problem 3.2BC
To determine
Variation in prices of airlines.
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The subway fare in your town has just been increased from 50 cents to $1.00 per ride. As a result, the transit authority notes a decline in ridership of 60 percent.
What is the price elasticity of demand for subway rides?
According to the Law of Elasticity, there are elastic and inelastic markets. If we relate
this concept to pricing, under what type of market will it be favorable for us to
decrease our price? On the other hand, what type of market will favor an increase in
price? Explain
If you had been hired to advise your local public transit authority on how they could raise transitrevenues and you knew the elasticity of demand for transit rides, you would be able to give a goodanswer.Explain why above statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate.
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- Prove that price elasticity of demand is not the same as the slope of a demand curve.arrow_forwardIf the midpoint on a straight-line demand curve is at a price of $7, what can we say about the elasticity of demand for a price change from $12 to $10? What about from $6 to $4?arrow_forwardSuppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a. Calculate the price elasticity of demand between 90 and 110. b. Is the price elasticity of demand between 90 and 110 elastic, unit elastic, or inelastic? c. Will Erins total revenue rise if she increases the price from 90 to 110? d. Calculate the price elasticity of demand between 110 and 130. e. Is the price elasticity of demand between 110 and 130 elastic, unit elastic, or inelastic? f. Will Erins total revenue rise if she increases the price from 110 to 130?arrow_forward
- Suppose a movie theater raises the price of popcorn 10 percent, but customers do not buy any less popcorn. What does this tell you about the price elasticity of demand? What will happen to total revenue as a result of the price increase?arrow_forwardSuppose you are a business owner. Discuss how you would use various demand elasticities (own-price, cross-price & income) in your decision making process.arrow_forwardAnswer in step by step with explanation. Don't use Ai and chatgpt.arrow_forward
- Explain the economic concept of elasticity. Apply it to at least one real-world example in detail.arrow_forwardIf the elasticity coefficient is less than 1, what do we know about demand?arrow_forwardYou were gifted a box of 50 thermos bottles that you do not need and you plan to sell them on Ebay. You were initially thinking of asking for $20 per bottle, but then you found out that demand is elastic at $20. Should you lower your asking price? Yes, because when demand is elastic, a lower price increases revenue. Yes, because when demand is inelastic, a lower price increases revenue. No, because when demand is inelastic, a lower price increases revenue. No, because when demand is elastic, a higher price increases revenue.arrow_forward
- Suppose the elasticity of demand for used cars is estimated to be 3. What does this mean? What will be the effect on the quantity demanded for used cars if the price rises by 10 Percent? Suppose a university raises its tuition from $3,000 to $3,500. As a result, student enrollment falls from falls from 5,000 to 4,500. Calculate the price elasticity of demand. Is demand elastic, unitary elastic, or inelastic? Suppose the movie theater raises the price of popcorn 10 percent, but customers do not buy any less of it. What does this tell you about the price elasticity of demand, and what will happen to total revenue as a result of the price increase? Suppose the income elasticity of demand for furniture is 3 and the income elasticity of demand for physician services is 0.3. Compare the impact on furniture and physician services of a recession that reduces consumer income by 10%. Opponents of increasing the tax on gasoline argue that the big oil companies just pass the tax…arrow_forwardFor each of the following pairs of goods, which good would you expect to have more elastic demand? Pairs of Goods More Elastic Demand Shoes in general or light-up shoes Chicago Symphony recordings or orchestral music recordings in general Subway rides during the next 6 months or subway rides during the next 5 years Pens in general or blue ballpoint pensarrow_forwardtake a moment to see if you can figure out which of the following products have elastic demand and which have inelastic demand. It may be helpful to remember that when the buyer is insensitive to price, demand is inelastic. Gasoline, College textbooks, Coffee, Airline tickets, Concert tickets, Soft drinks, Medical procedures.arrow_forward
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