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- Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?A movie production company faces a linear demand curve for its film, and it seeks to maximize total revenue from the films distribution. At what level should the price be set? Where is demand elastic, inelastic, or unit elastic? Explain.FoisPas, a French restaurant in Westwood, has decided to increase the price of its Sunday brunch from $30 to $34. Following this price increase, the number of reservations on a typical Sunday dropped from 60 to 55. Which statement is correct? O FoisPas was initially maximizing revenues, as demand was unit-elastic at the initial price O The total costs faced of FoisPas on a typical Sunday must have increased for sure O The price increase led to a decrease in total revenues as demand was elastic at the initial price O FoisPas faces a horizontal demand curve O The price increase had a positive impact on total revenue as demand was inelastic at the initial price
- If a store increases its prices by 20% and its total revenue decreases by 10%, the demand it faces in this price range must be perfectly inelastic perfectly elastic inelastic unit elastic elastic Assume that the supply of corn is relatively price inelastic, while the demand for corn is relatively price elastic. If the government imposes a per-unit excise tax on the production of corn, the incidence or burden of the tax will fall entirely on sellers equally on both buyers and sellers more on buyers than on sellers entirely on buyers more on sellers than on buyers The absolute value of the price elasticity of demand for a good increases when the good has fewer substitutes the price of an input used to produce the good increases the good becomes a necessity consumers spend a greater portion of their budget on the good the good must be purchased as soon as the need arises (not possible to wait) O O O OThe Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfighter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopdecay’s sales declined by 1,500 units per month.a. What is the arc cross elasticity of demand between Stopdecay’s toothbrush and Decayfighter’s toothbrush? What does this indicate about the relationship between the two products?b. If Stopdecay knows that the arc price elasticity of demand for its toothbrush is −1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30.c. What is Stopdecay’s average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)?d. Is the result in part (c) necessarily desirable? What other factors would have to…The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20- pound bags of charcoal at $3.15 instead of the regular price of $4.25. In a week, a total of 180 bags of charcoal was sold. The store normally sells an average of 120 bags per week. What is the store’s arc elasticity of demand for charcoal? Also make an economic interpretation of the elasticity figure.
- If the price minute of JAWWAL- Oreedo is ILS 0.65 , and ATPU (Average traffic per user)is 55 minutes. Suppose that JAWWAL made 30% discount on minute price duringRamadan:a) Calculate the price elasticity of demand on JAWWAL service, if ATPU rises to 85 minutesdue to this offer, interpret your answer.b) Based on your answer in (a ) is the demand on JAWWAL service elastic, inelastic, orunit elastic.c) What do you advice Jawwal , is it profitable for JAWWAL to make the same offer gain,explain your answer.What is the relationship between AR and MR when the firm faces perfectly elastic demand for its productVik and Fleet produce trainers in the sports-shoe market. For one of their main productsthey have the following demand curves: Vik PV =175 - 1:2Qv, Fleet Pf = 125 - 0:8Qfwhere P is in Rs. and Q is in pairs per week. The firms are currently selling 80 and 75 pairsof their products per week respectively.a. What are the current price elasticities for the products?
- The Nguyen’s Noodle House in a country town decides to due to the Covid 19 situation to decrease the prices for its takeaway meals by 5%. What will happen to their total revenue and the quantity sold if their product is: a) An elastic product? b) A unitary elastic product? c) An inelastic product? d) Which type of elasticity type do you think will apply to the meals of Nguyen’s Noodle House? Briefly explain what determinants of price elasticity will affect the product demand?Creative Homework/Short Project Assume that you arean entrepreneur who runs a bakery that sells glutenfree breads and cakes. You believe that the currenteconomic conditions merit an increase in the price ofyour baked goods. You are concerned, however, thatincreasing the price might not be profitable becauseyou are unsure of the price elasticity of demand for yourproducts. Develop a plan for the measurement of priceelasticity of demand for your products. What findingswould lead you to increase the price? What findingswould cause you to rethink the decision to increaseprices? Develop a presentation for your class outlining(1) the concept of elasticity of demand, (2) why raisingprices without understanding the elasticity would bea bad move, (3) your recommendations for measurement, and (4) the potential impact on profits for elasticand inelastic demandThe Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.50. As a result, the firm's daily sales of these sundaes have increased from 1,500 per day to 1,800 per day. What is the arc price elasticity of demand over this price and consumption quantity range?
