NAME: UlZ on price elasticity of demand ultiple Choice dentify the choice thet b
ID: 1138819 • Letter: N
Question
NAME: UlZ on price elasticity of demand ultiple Choice dentify the choice thet best completes the statement or answers the question NOTE: You may write on this questionnaire for your computations. 1) An economist estimates that 83 is the price elasticity of demand for disposable razors. This suggests that disposable razor producers could: A. advertise more to raise the price elasticity of demand B. encourage more people to use non-disposable razors C. lower the price of disposable razors to raise more revenue. D. maximize revenues by staying at the current price. E. raise the price of disposable razors to raise more revenue. pizzas per week, then the demand for Johnny's pizzas in this range is: A. price inelastic. B. price elastic. 2) If Johnny, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to C. unit elastic. Exhibit 5-6 Demand curve for concert tickets 0 10 20 30 40 3) In Exhibit 5-6, suppose promoters charge a price of $30 per ticket. How much total revenue will their sales generate? A $300,000. B. $400,000. . $500,000. D. S600.000. 4) Anita is a famous attorney with a great reputation in court. She charges her clients $300 for each hour she spends working on their cases. If she earned $450,000 in hourly wages last year, and by raising her rates to $350 per hou income increased to $490,000 what can we say about the elasticity of demand for Anita's legal services? A It is approximately equal to 2.3. B. It is approximately equal to 1.6. C. It is approximately equal to 1.0. D. E. It is approximately equal to 0.45. It is approximately equal to 0.1. A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price $40. The price elasticity of demand for memberships at this health club is: A 0.25. 5) D. E. 0.83 none of the above C. 1.0Explanation / Answer
1) Select option E because demand is inelastic (ed < 1). This will raise revenue only when price is increased. When demand is inelastic, price increase can increase revenue
2) Use mid point elasticity and find that ed = (600 - 400)/((600 + 400)/2) divided by (5 - 6)/((6 + 5)/2) = -2.2, This implies that demand is price elastic. Option B
3) Revenue = P x Q = $30 x 10 = $300 thousand. Option A.
4) Working hours before wage change = 450,000/300 = 1500 and working hours after the change = 490,000/350 = 1400 hours. Elasticity is ed = (1400 - 1500)/((1500 + 1400)/2) divided by (350 - 300)/((350 + 300)/2) = -0.45. Select D.
5) Option D.
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