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- Describe the general appearance of a demand or a supply curve with infinite elasticity.Suppose you could buy shoes one at a time, miter than in pain. What do you predict the cross-price elasticity for left shoes and right shoes would be?(Determinants of Price Elasticity) Would the price elasticity of demand for electricity be more elastic over a shorter or a longer period of time?
- What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens lo the measured elasticity? How would you explain that?Why is the supply curve with constant unitary elasticity a straight line?What is the formula for calculating elasticity?
- Suppose you are in change of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your companys product at the current price is 1.4, would you advise the company to raise the price, lower the price, or to keep the price the same? What if the elasticity were 0.6? What if it were 1? Explain your answer.1. Use the Elasticity formula to calculate values of Elasticity for all the situations below. PRICE QUANTITY STEP 1 STEP 2 % CHANGE IN P STEP 3 PRICE ELACTICITY OF % CHANGE IN Od DEMAND Initial new Initial new 25 100 40 40 70 120 90 200 220 80 64 50 75 150 135 In each case, identify whether you would describe it as elastic / unit elastic / inelastic and why? 1. 2. 3. 4. 030Creative 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 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 price elasticity of demand for a product is estimated to be -2.3. At the initial price of $20, the quantity demanded was 10 units. If the firm increases theprice to $22.50, quantity demanded is expected tobyO A. decrease: 28.75%6O B. increase; 12.596O C. decrease: 18.75%O D. increase: 17.2596PRICE (Dollars per unit) 140 50 20 0 Region Between W and X Between X and Y Between Y and Z W O True O False QUANTITY (Units) For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic. N O Elastic Inelastic Unit Elastic Demand (S. ? True or False: The value of the price elasticity of demand is equal to the slope of the demand curve.
