2.3. DeMAND ELASTICITY. Based on the values in Table 2.1, provide an estimate of
ID: 1149591 • Letter: 2
Question
2.3. DeMAND ELASTICITY. Based on the values in Table 2.1, provide an estimate of the impact on sales revenues of a 10% increase in each product's price. TABLE 2.1 Price elasticity of demand for selected products and services Product and market Norwegian salmon in Spain Norwegian salmon in Italy Coffee in the Netherlands Natural gas in Europe (short-run) Natural gas in Europe (long-run) US luxury cars in US Foreign luxury cars in US Basic cable TV in US Satellite TV in US Ocean shipping services (worldwide) Elasticit 0.8 0. 0.2 0.2 -2.8 5.4 4.4Explanation / Answer
Product & Market Elasticity Change in revenue = % change in price *(1+E) Norwegian Salmon in Spain -0.8 2.00% Norwegian Salmon in Italy -0.9 1.00% Coffee in the Netherlands -0.2 8.00% Natural gas in Europe (Short run) -0.2 8.00% Natural gas in Europe (long run) -1.5 -5.00% US luxury car in the US -1.9 -9.00% Foreign Luxury cars in the US -2.8 -18.00% Basic Cable TV in US -4.1 -31.00% Satellite TV in US -5.4 -44.00% Ocean Shipping Services (worldwide) -4.4 -34.00%
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