Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 6, Problem 12P
To determine
The effect of raising
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Suppose that you are a staff economist with an economic consulting firm. The operator of a local harbour has commissioned your firm to do a market analysis of the demand for berths (parking spaces) for boats. Your firm finds that the price elasticity of demand for berths is –0.8.
If the price of a berth in the area decreases by 6%, how will the quantity of berths that people demand change? The number of berths demanded will:
Increase by 0.8%
Decrease by 7.5%
Increase by 6%
Increase by 4.8%
Imagine you work as an economist for a particular airline (A). Your job entails estimating the passenger demand for airline travel provided by A. Accordingly, you estimate the following:
Price elasticity of demand for A’s service = 3
Cross elasticity of demand for A’s service (with respect to airline B’s price) = 2
Income elasticity of demand for A’s service = 1
Making sure to show all of your work, if consumer income falls by 5% (due to a recession), and at the same time airline B lowers its price by 10%, all else equal, what would you specifically recommend A due to its price to maintain its quantity of passengers (i.e., lower or raise its price and by what percent)? Hint: Elasticities are ratios of percentage changes.
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Demand for Corn Flakes is: P = 11 - Q. Supply of Kellogg's Corn Flakes is: P = 2 + Q. Now a generic company enters the market, selling generic Corn Flakes for $8. Assume consumers are indifferent between generic and Kellogg's Corn Flakes. How many boxes of corn flakes will sell in total (both brand and generic)? Enter as a value.
Chapter 6 Solutions
Exploring Economics
Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Explain why using the midpoint formula for...Ch. 6 - Prob. 7PCh. 6 - If the elasticity of demand for hamburgers equals...Ch. 6 - Evaluate the following statement: Along a...Ch. 6 - If the midpoint on a straight-line demand curve is...
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