Demand for Magnum Ice Cream is given by an equation as Q = 70 – 10P + 4 Px + 50 I Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Income Assume P = Rs 100, Px = Rs 120 and I = Rs 25 (Rs in thousands). Calculate Price Elasticity of Demand Cross Price Elasticity of Demand Income Elasticity of Demand and How the elasticity does estimates help in managerial decision making?
Demand for Magnum Ice Cream is given by an equation as Q = 70 – 10P + 4 Px + 50 I Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Income Assume P = Rs 100, Px = Rs 120 and I = Rs 25 (Rs in thousands). Calculate Price Elasticity of Demand Cross Price Elasticity of Demand Income Elasticity of Demand and How the elasticity does estimates help in managerial decision making?
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...
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a)
Demand for Magnum Ice Cream is given by an equation as Q = 70 – 10P + 4 Px + 50 I
Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Income
- Assume P = Rs 100, Px = Rs 120 and I = Rs 25 (Rs in thousands).
Calculate
- Price
Elasticity of Demand - Cross Price Elasticity of Demand
- Income Elasticity of Demand
and
- How the elasticity does estimates help in managerial decision making?
b)
A city government is considering renting space in an all‑day parking garage for its 100 employees. The government estimates these employees' demand function for parking spaces is 150 ‑ 50P (P ≥ $1), where P is the per-day price of parking, and the city will pass on the cost.
- If the city needs not charge each of its employees the same price for a parking space, what is the maximum amount the city could pay for the 100 spaces, and what would be the average cost per space?
- Assume the employees’ union insists that – per their contract – each employee must be charged the same price for parking, and the city’s response is to intend charging the price that maximizes its parking fee revenue. What price per space would the city charge under this circumstance, and how much less total dollar benefit would the employees receive?
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