For the following three cases, use a midpoints formula to calculate the coefficient for the cross elasticity of demand and identify the type of relationship between the two products. (a) The quantity demanded for product A increases from 30 to 40 as the price of product B increases from $0.10 to $0.20. Elasticity: ______ Relationship: ________________ (b) The quantity demanded for product A decreases from 3000 to 1500 as the price of good B increases from $5 to $10. Elasticity: ______ Relationship: ________________ (c) The quantity demanded for product A remains 400 units as the price of product B increases from $25 to $30. Elasticity:

For the following three cases, use a midpoints formula to calculate the coefficient for the cross elasticity of demand and identify the type of relationship between the two products. (a) The quantity demanded for product A increases from 30 to 40 as the price of product B increases from $0.10 to $0.20. Elasticity: Relationship: (b) The quantity demanded for product A decreases from 3000 to 1500 as the price of good B increases from $5 to $10. Elasticity: Relationship: ________ (c) The quantity demanded for product A remains 400 units as the price of product B increases from $25 to $30. Elasticity:

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 16SQ

See similar textbooks

Similar questions

When Price is increased from $40 to $42, the Quantity Demanded falls from 50 units to 45 units, while the Quantity Supplied increases from 50 units to 70 units. Use this information to:(i) Calculate the Price Elasticity of Demand and the Price Elasticity of Supply.(ii) Give the name of the Price Elasticity of Demand and explain what the coefficient tells you about the product.(iii) Calculate the Total Revenue when price is $42.
a) Everything else held constant, what will happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up and health officials announced that eating peanut butter was good for your health? Provide brief explanation. b) Everything else held constant, there is a 12 percent increase in the price of peanut butter jar. As a result, quantity demanded drops by 20 percent. Calculate the price elasticity of demand for a jar of peanut butter. ( c) For part (b), explain briefly whether the revenue will increase or decrease?
Which of the following elasticities measure a movement along a curve rather than a shift in the curve?(a) The price elasticity of demand. (c) The cross elasticity of demand.(b) The income elasticity of demand. (d) The price elasticity of supply.
(1) Given the following demand function: Q=15.6-0.5 p (a) Graph the demand curve. (b) Calculate for price elasticity of demand at p*= 7 and Q* = 12. (c) Explain intuitively your answer in (a).
Question 3 The Pear company sells a smart phone for $350. Its sales have averaged 9,000 units per month over the last year. Recently, its closest competitor Banana company reduced the price of its smart phone from $450 to $300. As a result, Pear's sales declined by 1,500 units per month. (a) What is the cross price elasticity of demand between the Pear and Banana smart phone? Use the averaging formula. What does this indicate about the relationship between the two products? (b) If the Pear company knows that the price elasticity of demand for its phone is -1.5, what price would the Pear company have to charge to sell the same number of units as it did before the Banana company price cut? Assume that Banana company holds its price of its phone constant at $300. Use the averaging formula.
If the own price elasticity of demand for a good is 4.0. then a 10 per cent increase in price results in a : (a) 0.4 percent decrease in the quantity demand (b) 2.5 percent decrease in the quantity demand (c) 4.0 percent decrease in the quantity demand (d) 40 percent decrease in the quantity demand
Quantity of A traded 10,000 15,000 Household Income | Price of B $3000 Price of A $1.10 $1.50 $0.90 $2500 $1.20 (i) Determine the price elasticity of demand for A, income elasticity of demand for A and the cross price elasticity of demand between A and B using the mid-point formula. Based on the elasticities, classify A in terms of its price and income elasticities of demand and establish the relationship between product A and product B. Given that the price of product A increases by 5%, household income increases by 3% and the price of product B increases by 2%, explain and compute the effect on the revenue from product A, assume each of the changes occurs separately. (ii) (b) The demand and supply functions of wheat is given as P = 20 – 0.05Q and P = 10 + 0.05Q, respectively. Solve for the equilibrium price and quantity in the wheat market. If the government implement a price floor of $18 per unit of wheat to help the wheat farmer, compute the consumer surplus, the producer surplus…
A manufacturer sells two products, A and B and had raised the prices of the two products recently to cover the higher production costs. The price and quantity for each product before and after the price change is given in the table below. Product A B Initial Price $250 $600 Initial Quantity demanded 28050 New Price $300 $750 New Quantity demanded 20045 Calculate the price elasticity of demand for both products using the midpoint method. Comment on their elasticities and explain two (2) possible reasons why they are different. What should the manufacturer do to the prices of the two products if the objective is to earn more revenue?
Assume that the following table represents the demand schedule for the product of your company: Price 0 10 20 30 40 50 60 70 80Quantity 160 140 120 100 80 60 40 20 0per day TotalRevenue (TR) Use your knowledge about the relationship between elasticity, prices and revenue how you would maximise the total revenue of a company that produces an inelastic good. Substantiate your answer with appropriate diagrams.
The following is a demand schedule for good Z. Price per unit (£) 10 15 20 25 30 Q demanded per week 30 25 15 10 (a) Plot the demand curve for good Z to show it is linear. (b) (i) Calculate price elasticity of demand (PED) for an increase in price from £5 to £10. Is demand elastic or inelastic? (ii) Calculate price elasticity of demand (PED) for an increase in price from £20 to £25. Is demand elastic or inelastic? (iii) Using your results of parts (i) and (ii), explain what happens to PED along a straight-line demand curve. (c) Explain, using diagrams, the relationship between price elasticity of demand and profits. E Please select file(s) Select file(s) 20
1. Calculate percentage changes in a product price and its demanded quantity (for product A and product B). Then calculate Elasticities using the follwing data: Price per product A (EUR) Quantity of A (items) Change in Price (%) Change in Quantity (%) Direct Price Elasticity of Demand (EAA) Comment Cross-Price Elasticity of Demand (EAB) Comment 10 100 |EAA| < 1 meaning inelastic demand EAB > 0 meaning A and B are substitues 12 90 20 -10 -0.5 0.25 Price per product B (EUR) Quantity of B (items) Change in Price (%) Change in Quantity (%) Direct Price Elasticity of Demand (EBB) Comment Cross-Price Elasticity of Demand (EBA) Comment 30 50 |EBB| > 1 meaning elastic demand EBA > 0 meaning B and A are substitues 18 105 -40 110 -2.75 5.5
Q) The quantity demanded or product X has increased by 10% in response to a 15% increase in price of product Y. Calculate the cross elasticity of demand and tell whether the product pair is (a) Voltas AC and Videocon AC or (b) Cars and Petrol and what you suggest for strategies the pricing policy.