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22 Apr 2019

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1- Suppose price elasticity of demand of a pizza at the local pizza restaurant is setimated to be 4. by how much does the quantity of pizza sold change if the shop raises the price of pizza by 5%?

2- Suppose a local clothing estimates that the income of its customers has increased by 16%. This clothing store calculated income elasticity of demand to be 1.2. how much should the quantity demanded of clothes change based on this infomation? what does the income elasticity tell you about the goods this clothing store is selling?

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22 Apr 2019

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""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""""Please answer with simple explanations""

1. Which of the following is not characteristic of the demand for a commodity that is elastic?

a. The relative change in quantity demanded is greater than the relative in price

b. Buyers are relatively sensitive to price changes

c. Total revenue declines if price is increased

d. The elasticity coefficient is less than one

2. Suppose the price elasticity of demand for bread is 0.20 if the bread falls by 10 percent, the quantity demanded will increase by:

a. 2 percent and total expenditures on bread will rise

b. 2 percent and total expenditures on bread will fall

c. 20 percent and total expenditures on bread will fall

d. 20 percent and total expenditures on bread will rise

3. If a consumer is equilibrium, an increase in money income will:

a. Move him to a new equilibrium on a lower indifference curve

b. Make his indifferent curves steeper, but will not alter the equilibrium position

c. Have no effect on the equilibrium position because product prices have not change

d. Move him a new equilibrium on a high indifferent curve

4. The larger the coefficient of price elasticity of demand for a product, the:

a. Larger the resulting price change for an increase in supply

b. More rapid the rate at which the marginal utility of that product diminishes

c. Smaller the resulting price change for an increase in supply

5. A manufactures of frozen pizzas found that total revenue decreased when price was lowed from $5to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

a. The demand for pizza is elastic above $5 and inelastic below $5

b. The demand for pizza is elastic both above and below $5

c. The demand for pizza is inelastic above $5 and elastic below$5

d. $5 is not the equilibrium price of pizza

6. The elasticity of demand for a product is likely to be greater

a. if the product is necessity, rather than a luxury

b. the greater the amount good of time over which buyers adjust to a price change

c. The smaller the proportion of one

rubylizard363

a) As the price of margarine rises by 20%, a manufacturer of baked goods increases its quantity of butter demanded by 5%. Calculate the cross-price elasticity of demand between butter and margarine. Are butter and margarine substitutes or complements for this manufacturer?

b) After Malia's income increased from $12,000 to $18,000 a year, her purchases of album downloads increased from 10 to 40 downloads a year. Calculate Malia's income elasticity of demand for albums.

c) Expensive restaurant meals are income-elastic goods for most people, including Sanjay. Suppose his income falls by 10% this year. What can you predict about the change in Sanjay's consumption of expensive restaurant meals?

turquoisesheep415

Elasticity is a measurement of how much a change in the price of a product or service will affect a change in the quantity demanded or supplied of that same product or service. The product or service can be unit elastic, inelastic, or elastic. The unit elastic response moves exactly in the direction of and in proportion to the change in price as would generally be the case with clothing. An inelastic response is one in which the change in quantity demanded or supplied is less than one-to-one as would the case with medication. An elastic response to a price change is one in which the change in quantity demanded or supplied is greater than one-to-one as would be the case with luxury goods.

(A). Why is the concept of elasticity useful to a business?

(B). What benefit can a business derive from an understanding of elasticity?

(C). (i)If the elasticity measurement indicates unit elastic response, what effect does this have on the firm's pricing policies?

(ii) If the elastic measurement indicates an inelastic response, what effect does this have on the firm's pricing policies?

(iii) If the elasticity measurement indicates an elastic response what effect does this have on the firm's pricing policies?