Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 2, Problem 18PAA
To determine
To show:
The graphical representation to show the impact of legislation.
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Ever since the Indian government opened up its telecom industry to competition in 1999, Indian consumers have seen their phone bills shrink. In 2000, the charge for making a call with a cellular phone was 16 rupees per minute (about 27 U.S. cents) By 2011 that rate had fallen to 1 paisa per second-roughly 1 cent per minute. In the same time period, the number of mobile subscribers skyrocketed from 2 million to 584 million. Today, there are 930 million cellular subscribers, making India the world's second largest mobile phone market. How did all this come about? India opened the telecom market to new entrants,reduced license fees, and lowered tariffs, encouraging dozens of firms to complete for India telephone customers.
(A) by what percentage did the price of a phone minute decline after competition emerged?
(B) By what percentage did the quantity demanded increase?
(C) what was the apparent price elasticity of demand?
Imagine you are a bank manager. Currently, your bank holds $8 million in deposits at a 4% interest rate. However, you need to increase the total deposits to $10 million. The interest rate elasticity of savings is 2.40.
What interest rate should you offer to depositors to obtain the required amount, all other things being equal?
In the Current Events article, it mentioned how DoorDash is trying to increase its amount of subscription users (DashPass).
The price for DashPass is $10 per month.
Assume the demand for regular DoorDash deliveries (non-subscription) is:
P = 20 - 0.04Q
where P is the delivery fee on the order.
Assume the goal of the company is to maximize combined revenue from both regular deliveries (delivery fees) and the subscription fees (DashPass).
A different manager suggest pricing the deliveries at $14 per delivery. Which of the following actions would you select as a manager?
Group of answer choices
Advise that it should be a $10 fee per delivery
Advise that the$14 delivery fee is too low
Advise that it should be a $20 fee per delivery
Agree that $14 per delivery is optimal in this situation
Chapter 2 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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