ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- The demand function for a certain item is Q= p represents the price of an item and Q represents the number of items sold at that price. (a) Evaluate the demand elasticity E when p = 8. E(8)= -0.625 (b) For what value of p is the demand elasticity unitary? p=|| Here, "demand elasticity" is the absolute value of = 200(80 - p²). percent change in quantity percent change in price for an infinitesimal change in price, so E = AQIQ lim Ap-0 Aplparrow_forwardSomeone tells you the "absolute value" of the cross price elasticity of two substitutes like Coke and Pepsi is 2.40. Based on this information, what percent change in the price of Coke will cause the quantity demanded of Pepsi to increase by 3%.arrow_forwardWhen the local pizza parlor prices pizzas at $12 each, it generally sells 7000 pizzas per month. If it lowers the price to $10, sales increase to 9000 pizzas per month. Given this information, we know that the price elasticity of demand for pizza is about 1.38, and an increase in price from $10 to $12 results in a decrease in total revenue. 0.72, and an increase in price from $10 to $12 results in an increase in total revenue. 0.72, and an increase in price from $10 to $12 results in a decrease in total revenue. 1.38, and an increase in price from $10 to $12 results in an increase in total revenue.arrow_forward
- Suppose Amazon lowers its Prime membership monthly fee from $12.99 to $9.99. The price elasticity of demand for Amazon membership subscription in this price range is estimated at -0.8. You predict that the number of Prime subscriptions will (increase/decrease) increase Aby (enter a number rounded to one digit after the decimal point, e.g., 22.2) A/ % and that Amazon's revenue will (increase/decrease) A by (enter a number rounded to one digit after the decimal point, e.g., 9.9) A %.arrow_forwardThe cross price elasticity between two goods is +0.9, the initial prices of the two goods are P1 = $2 and P2 = $3, the initial quantities of the goods are Q1 = 10,000 and Q2=8000. Calculate the new amount of Q2 demanded if P1 increases to $2.75 Type your numeric answer and submit 21333 Xarrow_forwardSuppose that for your demand schedule for pizza is as follows:a)Use the midpoint method to calculate your price elasticity of demand as the price of pizza increases from$8 to $10 if(i)your income is $20,000(ii)your income is $24,000.b)Calculate your income elasticity of demand as your income increases from$20,000 to$24,000(i)the price is $12 and (ii) the price is $16arrow_forward
- QUESTION 7 To mark national burger day there is a nationwide 50% sale on burgers during May. A recent survey, of those who bought burgers at supermarkets and food trucks, found that 99% of people will only eat burgers in a bun. Which of the following statements are true: The decrease in the price of burgers during May will cause a decrease in the quantity demanded of burgers. The decrease in the price of burgers in May will cause an increase in both demand and quantity demanded for buns. The decrease in the price of burgers in May will only result in an increase in the quantity demanded for buns. Economic theory is unable to predict if there would be any shift in demand for buns with the discount on burgers in May.arrow_forwardAccording to the U.S. Department of Energy, the average price of gasoline in the U.S. fell by 14% in 2015. The number of hybrid electric vehicles (HEV) sold in the U.S. fell by 36% in the same year. Calculate the cross-price elasticity of demand for HEVs and gasoline. Round answer to one place after the decimal.arrow_forwardA recent report by the Centers for Disease Control looked at the relationship between the price of beer and the incidence of new cases of STD's. The report concluded that a beer tax increase of $.20 could reduce overall STD rates by 8.9%. Assume that a six pack cost $5.90 before the price increase. Calculate the cross price elasticity between beer and STD's. What is the sign of this cross-price elasticity? According to your estimate, are beer and STD's compliments or substitutes? Does your answer make sense? Explain.arrow_forward
- At Webs-R-Us, a website design company, the new manager has decided to increase the price of Webs-R-Us services by 45%. She estimates that the price elasticity of demand for Webs-R-Us is −0.70. The manager expects the number of websites designed to decrease by?arrow_forward1) Give an example of a product that is elastic and explain why. 2) Give an example of a product that is inelastic and explain why. Thank you !!arrow_forwardA gas station owner sees a report on TV which states that the number of gallons of gasoline sold in the U.S. has barely dropped, even as the price per gallon has soared in recent weeks. The price elasticity of demand for gasoline is described in the report as “highly inelastic”. The gas station owner responds to this report by jacking up the prices at his station by 50 cents per gallon. Sales and revenues at his station plummet in the first month after the price increase, and drop even further in the second month. What factors did this gas station owner fail to consider when he responded to the TV report by aggressively raising his prices?arrow_forward
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