Q2Suppose the price elasticity of demand for the market of mobile phones is 0.90. If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease? If a single mobile-phone company increased its price, would you expect the company’s total revenue to increase or decrease? Explain. Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentage change in the quantity demanded? Answer:- Q3If you have SAR 50,000 to start a new business, you can earn 10 percent interest on money in a bank account. Your business expenses are SAR 22,000 per year on rent, SAR 18,000 per year on supplies, and SAR 5,000 per year on part time help. As for your personal expenses, your apartment costs you SAR 12,000 per year and your personal bills are an extra SAR 6,000 per year. What is your opportunity cost of running the business?

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Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....

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Suppose the price elasticity of demand for the market of mobile phones is 0.90.

If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease?
If a single mobile-phone company increased its price, would you expect the company’s total revenue to increase or decrease? Explain.
Suppose that the price in the market is initially $10 and the quantity demanded is 100 units. If the price in this market increases by 10%, what will be the percentage change in the quantity demanded?

Answer:-

If you have SAR 50,000 to start a new business, you can earn 10 percent interest on money in a bank account. Your business expenses are SAR 22,000 per year on rent, SAR 18,000 per year on supplies, and SAR 5,000 per year on part time help. As for your personal expenses, your apartment costs you SAR 12,000 per year and your personal bills are an extra SAR 6,000 per year. What is your opportunity cost of running the business?

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