Price of good x (RM) Quantity demanded for good x (Units) Quantity demanded for good Y (Units) Quantity demanded for good Z (Units) 1 100 1,000 10 50 500 20 25 250 40 4 20 200 80 5 18 180 180 a) What is the relationship between: i) ii) Goods X and Y? Goods X and Z? b) If you are the producer of good x and you want to increases your total revenue would you increase the price of RM3 per unit to RM4 per unit? Why? (use the concepts of elasticity in your answer)?

Price of good x (RM) Quantity demanded for good x (Units) Quantity demanded for good Y (Units) Quantity demanded for good Z (Units) 1 100 1,000 10 50 500 20 25 250 40 4 20 200 80 5 18 180 180 a) What is the relationship between: i) ii) Goods X and Y? Goods X and Z? b) If you are the producer of good x and you want to increases your total revenue would you increase the price of RM3 per unit to RM4 per unit? Why? (use the concepts of elasticity in your answer)?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Elasticity

Section: Chapter Questions

Problem 11QP: Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price...

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The following table shows the demand and supply of tickets of a football game which will be held at Shah Alam Stadium. Unit Price (RM) Market Demand (units) Market Supply (units) 20 5000 3500 40 4000 3500 60 3000 3500 80 2000 3500 100 1000 3500 a) On your foolscap paper, draw the demand and supply curves. Label all axes, all curves and the equilibrium point. (6m) b) How much is the equilibrium price and equilibrium quantity? (2m) c) At which price will there be a surplus of 2500 tickets? (1m) d) What will happen when the market price is RM40? Show your answer on the same diagram. (3m) e) Why is the supply of tickets fixed at 3500? (1m)
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For a good with the following demand: Quantity Demanded Price 6000 $20 14,000 $15 (a) Calculate the price elasticity of demand using the Midpoint Method. (b) Is the demand for this good considered elastic or inelastic? (c) Do you think it is more likely that the average consumer will consider this good a necessity or a luxury? How did you determine your answer? (d) If sellers' production costs rise, will they be able to pass these higher costs onto the buyers in the form of higher prices? Explain.
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 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 demand
(1) The graph below shows the demand curves of two products by Ghana Nuts Company Ltd. Use the information provided on the graph to answer the questions that follow: Price Cedis per gallon 30 B 25 D1 D2 200 225 300 Quantity (gallons per day) (a) Calculate the price elasticity of demand for D, between point A and point C, and the price elasticity of demand for D2 between point A and point B. which of the two demand curve is more elastic? Briefly explain. (b) Suppose Ghana Nut is initially selling 200 gallons per day at a price of C30.00 per gallon, calculate the total revenue for Ghana Nuts Company Ltd. at price C30. If they cut the price to C25.00 per gallon and their demand curve is D1, what will be the change in their revenue? What will be the change in their revenue if demand curve is D2? 2. Suppose quantity demanded of beans increase from 1500 bags to 1800 bags as a result of an increase in the price of rice from GH¢80 to GH¢100. Calculate the cross price elasticity of demand for…
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he quantity demanded each month of Russo Espresso Makers is 250 when the unit price is $136. The quantity demanded ach month is 1000 when the unit price is $106. The suppliers will market 750 espresso makers when the unit price is $80 er higher. At a unit price of $100, they are willing to market 2250 units. Both the supply and demand equations are known o be linear. (a) Find the demand equation. -1 -x + 146 25 p = (b) Find the supply equation. 1 x+ 70 p = 75* (c) Find the equilibrium quantity and the equilibrium price. |× units
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6. Elasticity and total revenue The following graph shows the daily demand curve for bikes in Chicago. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. 120 110 Total Revenue 100 90 80 70 60 40 A 30 20 10 Demand 16 24 32 40 48 56 64 72 80 88 96 QUANTITY (Bikes) PRICE (Dollars per bike) 50