1. What effect, if any, does each of the following events have on the price elas
ID: 419535 • Letter: 1
Question
1. What effect, if any, does each of the following events have on the price elasticity of demand for corporate-owned jets?
The cost of manufacturing corporate jets rises.
Reduced corporate earnings lead to cuts in travel budgets and increase the share of expenditures on corporate jet travel.
2. 3-D movies have been popular and charged at a higher price, compared with the traditional 2-D movies. Please analyze the impact of 3-D movies (in the language of economics) on
The price elasticity of demand on 2-D movies
The total revenue of movie theater box offices
Please answer all of the two questions by one paragraph for each sub-question.
Explanation / Answer
1. The effect on the price elasticity of demand because of these reasons will be:-
a) The cost of manufacturing corporate jets rises:- If this happens then the price of making a corporate jet will rise, which then will then decrease the supply, but as jets are not used often and there are different kind of substitutes for it, the price elasticity for the jets in this situation is elastic
b) If there are reduced earnings, that leads to budget cuts, it leads to less travel budget too:- Here also the price elasticity will be more than 1 or we can say, the price elasticity will be elastic as the travel expenses and jet expenses are being cut down for the purpose of making decent profits. The Jets are not a necessity.
2)
a) The price elasticity of Demand of 2-D movies:- Because of the invention of 3-D, movies as of now the 2-D movies are at the position of being elastic as the people, if given a choice will always choose 3-D movies over 2-D movies.
b) The price elasticity of Demand with respect of total revenue:- Because of the invention of 3-D, massive level of the receipt and sales are done for 3-D movies, so the elasticity for 2-D movies again boils down to the fact that price elasticity of demand is elastic.
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