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Address the following:

Price elasticity of demand refers to the percentage change in demand resulting from a percentage change in price.

Please review the definition of relative inelasticity and relative elasticity. These terms refer to how much demand changes based on a change in price.

1) Choose any three products and classify and describe their price elasticity of demand; (relatively inelastic, relatively elastic, perfectly elastic, perfectly inelastic, or unitary elastic; your three product should illustrate different elasticities; ie: do not chose two relatively inelastic products)

2) Discuss what happens to the demand when the price changes for each of your items, specifically how much does demand change when the price changes?

3) Explain why demand changes the way it does for each of your three products

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019
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Related questions

1. The concept of price elasticity of demand measures:

a. the slope of the demand curve.

b. the number of buyers in a market.

c. the extent to which the demand curve shifts as the result of a price decline.

d. the sensitiveness of quantities demanded to price changes.

2. When the percentage change in price is less than the resulting percentage change in quantity demanded:

a. demand is elastic.

b. demand is inelastic.

c. demand is unit elastic.

d. none of the above.

3. The elasticity of demand:

a. will be the same at each price-quantity combination on a stable demand curve.

b. tends to be elastic in high-price ranges and inelastic in low-price ranges.

c. tends to be inelastic in high-price ranges and elastic in low-price ranges.

d. is infinitely large for a perfectly inelastic demand curve.

4. Suppose that as the price of Y falls from $2.00 to $1.80 the quantity of Y demanded increases from 110 to 121. It can be concluded that the price elasticity of demand is: _______.

5. Total revenue rises as the price of a good increases if price elasticity of demand is:

a. unitary elastic

b. perfectly inelastic.

6. The demand for such products as salt, bread, and electricity tend to be:

a. relatively price elastic.

b. relatively price inelastic.

c. of unit price elasticity.

d. perfectly price elastic.

Over the last year your boss has noticed that it would be useful for your firm to understand how consumers behave when variables in the market change and how these changes affect the total revenue for your product. You have been asked to do an analysis for your product, Good A, by addressing the following questions and reporting the results to your boss in a formal paper.

Questions:

  1. Define the price elasticity of demand? What information does it provide? How is it calculated?

  2. Define the income elasticity of demand? What information does it provide? How is it calculated?

  3. Define the cross-price elasticity of demand? What information does it provide? How is it calculated?

  4. What is total revenue? How is it calculated?

  5. Define elastic, inelastic, and unitary elasticity means. How are these related to total revenue? Explain your answers.

  6. With respect to the price elasticity of demand, construct a graph using the data in Figure1. Illustrate the ranges on the demand curve that indicate elastic, inelastic, and unitary elasticity. Explain your answers. Enter non-numerical responses in the same worksheet using textboxes.

  7. Calculate the total revenue for each level of demand and post into the table, Figure 1. (Copy and paste this table into the Microsoft Word document that will form part of your submission.)

  8. Using the midpoints formula presented in the textbook, calculate the price elasticity coefficient for each price level, starting with the coefficient for the $4 to $6 level. For each coefficient, indicate each type of elasticity: elastic demand, inelastic demand, or unitary demand. Post your answers into the table, Figure 1.

  9. Assume that the income of consumers changes by 10%, and as a result the quantity demanded for Good A changes by 8%. What is the income elasticity of demand for Good A? What does this mean for your company?

  10. Assume that the price of competing Good B decreases by 5% and as a result, the quantity demand for Good A decreases by 8%. What is the cross-price elasticity for your product? What type of goods are Good A and Good B?

Figure 1: The Demand Schedule for Barbeque Dinners


Price

Quantity Demanded

Total Revenue

Elasticity Coefficient

Elastic or Inelastic

$4

100

__________

XXXX

XXXX

6

80

__________

__________

__________

8

60

__________

__________

__________

10

40

__________

__________

__________

12

20

__________

__________

__________

14

1

__________

__________

__________

From the scenario for Katrina’s Candies, examine the procedure Herb will use to estimate the "demand model" for this product and comment on the expected price elasticity, income elasticity, and cross price elasticity of demand. That is, do you expect demand to be price elastic or inelastic? Will the income elasticity suggest Katrina Candies is a luxury or a necessary good? And, is there likely to be a strong cross price elasticity with the other products that Herb included in his demand model? Explain your answers. What can you determine about consumer demand for a product whose estimated demand elasticities are as follows: Price Elasticity of demand is -0.85 Income Elasticity of demand is 2.5 Cross Price Elasticity of demand with this product and your product is -2 I would like you to think about this simple formula for predicting the change in total revenue when there is a given percentage change in price. Using the example above, if ED (price elasticity of demand) is -.85, then a 10% increase in price will cause the quantity demanded to fall by 8.5%, (-8.5% / 10% = -.85). The Formula for Predicting % Changes in Total Revenue is: %ΔTR = %ΔQ + %ΔP where TR = Total Revenue, Q is Quantity Demanded and P = price. Using this formula, what would be the % Δ in TR if ED is -.85 and the %ΔP is 10%?

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