You are the manager of a firm that receives revenues of $20,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -3, and the cross-price elasticity of demand between product Yand X is -1.6.
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- In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is 1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?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(I) the concept of elasticity of demand, (2) why raisingprices without undetstanding the elasticity would bea bad move. (3) your recommendations for measurement. and (4) the potential impact on profits for elasticand inelastic demandCreative 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 demand
- A4 You are the manager for Papa John’s and know the following elasticities: η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5 η is the price elasticity of demand for Papa John’s (PJ) cheese pizza, ηxy1 is the cross elasticity of demand between PJ cheese pizza and Pizza Hut’s (PH) cheese pizza, ηxy2 is the cross elasticity of demand between PJ cheese pizza and PJ breadsticks, and η I is the income elasticity of PJ cheese pizza. e) If average income increases by 5% by what percentage and in what direction will the demand for Papa John’s cheese pizza change? Are PJ cheese pizzas a normal good or an inferior good and how do you know?Explain how the demand curves for normal productsand to, prestige products differ. What are demandshifts and why are they important to marketetS? Howdo firms go about estimating demand? How can marketetS estimate the elasticity of demand?P t onces In a statement to P&G shareholders, the Chief executive officer (CEO) of Gillette (which is owned by P&G) indicated, "Despite several new product launches, Gillette's advertising-to-sales declined dramatically... to 5 percent last year. Gillette's advertising spending, in fact, is one of the lowest in our peer group of consumer product companies." If the elasticity of demand for Gillette's consumer products is similar to other firms in its peer group (which averages -4.5), what is Gillette's advertising elasticity? Instructions: Enter your response rounded to two decimal places. Is Gillette's demand more or less responsive to advertising than other firms in its peer group? O Less responsive More responsive It responds the same.
- A firm derives revenue from two sources: goods X and Y. Annual revenues from good X and Y are $10,000 and $20,000, respectively. If the price elasticity of demand for good X is -4.0 and the cross-price elasticity of demand between Y and X is 2.0, then a 2 percent decrease in the price of X will: decrease total revenues from X and Y by $200. O leave total revenues from X and Y unchanged. increase total revenues from X and Y by $520. decrease total revenues for X and Y by $600.QUESTION 3 The supply curve of Leonardo DaVinci's Mona Lisa is: O Highly elastic O Infinitely elastic O Perfectly inelastic O Unit elastic O Highly inelastic QUESTION 4 Nadia has created a new brand of chocolate and realizes its price elasticity of demand is more than one. To increase her total revenue, she should: O Produce less chocolate O Not change the price O Decrease the price O Increase the priceyou sell twi different goods : printer and toner catridges. the price elasticity of demand for the printer is -3.4, and you earn a revenue of Rm15000 per month from the good. you earn a revenue of Rm5000 per month from the toner catridges. the cross price elasticity of demand for both of the goods is -2.5. if you decide to decrease the price of the printer by 5%, calculate your new total revenue for both of the goods.
- Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes? O The demand for cantaloupes at $2.00 must be inelastic. O We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. O The demand for cantaloupes at $2.00 must be elastic. O The demand for cantaloupes at $2.00 must be unit-elastic.Good U has a price elasticity of demand of 2.5 and Good Y has a price elasticity of demand of 0.7. Which of the following statements below describes these elasticities? O U has fewer substitutes than Y. O The elasticity of U is likely to be a short-run measure and the elasticity of Y is likely to be a long-run measure. U is a luxury and Y is a necessity. O U is a good when there is an increase in income and Y is a good when there is a decrease in income. 22 56. ans 57 a MacBook Air esc F1 F2 F3 F4 F5 #3 24 3 Q W E T tab A S F os lock C VYou sell two different goods: printers and toner catridges. The prices elasticity od demand for the printers is -3.4, and you earn a revenue of RM 15,000 per month from the good. You earn a revenue of RM 5,000 per month from the toner cartriges. The cross price elasticity od demand for both of the goods is -2.5. If you decide to decrease the price of the printers by 5%, calculate your new total revenue for both of the goods.