Skip to main content

Price demand curves and income elasticity


1) In order to attract more customers on Mondays (A slow day), Alex’s Pizza Shop in Austin decided to reduce the price of their pizza rolls from $3.50 to $2.50. As a result, Monday sales increased from 70 to 130. Also, Alex’s sales of soft drinks rose from 40 to 90.
a. Calculate the arc price elasticity of demand for the pizza rolls.
b. Calculate the arc cross-price elasticity of demand between soft drink sales and pizza rolls prices.
2) The demand curve for product X is given as Q = 20000 – 20P
a. How many units will be sold at $10?
b. At what price would 2,000 units be sold? 0 units? 1,500?
c. What will be the total revenue at a price of $70? What will be the marginal revenue?
d. What is the pint elasticity at a price of $70?
3) Manning’s Inc. is the leading manufacturer of garage doors. Demand for residential garage door sales depends, of course, on the rate of new house building activity. The garage doors sell at an average price of $1,500 per door. In the coming year, disposable income per capita is expected to increase from $32,000 to $34,000. Without any price change Manning expects current-year sales to rise to 12,000 units.
a. Calculate the arc income elasticity of demand.
b. The company economist estimates that if the price of doors is increased by $100, they could sell 11,500 doors. What is the arc price elasticity and what would be the company’s revenue?
c. Should they raise the price even more?
4) The Compute Company store has been selling its special word processing software, ACEWORD, during the last 10 months. Monthly sales and the price for Aceword are shown in the following table. Also shown are the prices for a competitive software, Goodwrite, and estimates of monthly family income. Calculate the appropriate elasticity’s keeping in mind that you can calculate elasticity measure only when all other factors do not change.
MONTH PRICE QUANTITY FAMILY PRICE
ACEWORD ACEWORD INCOME GOODWRITE
1 $120 200 $4,000 $130
2 $120 210 $4,000 $145
3 $120 220 $4,200 $145
4 $110 240 $4,200 $145
5 $114 230 $4,200 $145
6 $115 215 $4,200 $125
7 $115 220 $4,400 $125
8 $105 230 $4,400 $125
9 $105 235 $4,600 $125
10 $105 220 $4,600 $115
5) The ABC Company manufactures AM/FM clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28.
a. If the demand for ABC’s product has an elasticity coefficient of -3, how many will it sell per month if the price is lowered to $22?
b. The competitor decreases its price to $24. If cross-elasticity between the two radios is 0.3 what will ABC’s monthly sales be?
6) Mr. Smith has the following demand equation for a certain product:
Q = 30 – 2P
a. At a price of $7, what is the point elasticity?
b. Between prices of $5 and $6, what is the arc elasticity?
c. If the market is made up of 100 individuals with demand curves identical to Mr. Smith’s, what will be the point and arc elasticity for the conditions specified in parts a and b?

Comments

Post a Comment

Popular posts from this blog

Should pit bull terriers be banned in my community

 Discussion Forum: Counterarguments (Should pit bull terriers be banned in my community) You created a question about the topic for your W6 Rough Draft. For this discussion, you will give an answer to that question in the form of a thesis statement. "Dieting Makes People Fat" Main Post: Share your thesis statement with your classmates. Please note: As with last week’s discussion, nothing here is set in stone. Be open to changing everything about your topic, including your position and audience, as you research it and get feedback from your classmates. Topic + Position/Purpose + Supporting Points =Thesis Statement Example: Suppose the question you posed in the Week 5 discussion was something like, “Should pit bull terriers be banned in my community?” After doing some preliminary research, you have concluded that pit bulls, if raised properly, are no more dangerous than other breeds of dogs. Your thesis statement can be something like, “Pitbulls should not be banned
Post a Comment
Read more

Controversy Associated With Dissociative Disorders

 Assignment: Controversy Associated With Dissociative Disorders The  DSM-5-TR  is a diagnostic tool. It has evolved over the decades, as have the classifications and criteria within its pages. It is used not just for diagnosis, however, but also for billing, access to services, and legal cases. Not all practitioners are in agreement with the content and structure of the  DSM-5-TR , and dissociative disorders are one such area. These disorders can be difficult to distinguish and diagnose. There is also controversy in the field over the legitimacy of certain dissociative disorders, such as dissociative identity disorder, which was formerly called multiple personality disorder. In this Assignment, you will examine the controversy surrounding dissociative disorders. You will also explore clinical, ethical, and legal considerations pertinent to working with patients with these disorders. Photo Credit: Getty Images/Wavebreak Media To Prepare · Review this week’s Learning
Post a Comment
Read more

CYBER SECURITY and how it can impact today's healthcare system and the future

 Start by reading and following these instructions: Create your Assignment submission and be sure to cite your sources, use APA style as required, and check your spelling. Assignment: Recommendations Document Due Week 6 (100 pts) Main Assignment Recommendations Document The 1250 to 1500-word deliverable for this week is an initial draft of your recommendations. Note that this is a working document and may be modified based on insights gained in module eight and your professor's feedback. This document should contain the following elements: Summary of your problem or opportunity definition A list of possible recommendation alternatives. In this section, you are not yet at the point of suggesting the best set of recommendations but you are trying to be creative and explore all the different ways that the problem or opportunity might best be addressed. The end result here will be a list of alternatives among which you will choose your final recom
Post a Comment
Read more