The demand for Widgets (QX) is a function of the price of widgets (PX), the price of woozle (PY), and per capita income (I): QX = 1950 - 10 PX + 5 PY - 0.11 Currently, PX = 25, PY = 10_ and 1 = 15,000. (a) Calculate the elasticity of demand for widgets with respect to its own price, the price of woozles, and income. (b) Over what range of prices is the demand for widgets elastic? (c) If the cost per widget is 10 and the manufacturer behaves as a monopolist, how many widgets will be sold and at what price: (d) By how much must the price of widgets change if there is a 1% decrease in per capita income and the goal is to keep QX constant.
The demand for Widgets (QX) is a function of the price of widgets (PX), the price of woozle (PY), and per capita income (I): QX = 1950 - 10 PX + 5 PY - 0.11 Currently, PX = 25, PY = 10_ and 1 = 15,000. (a) Calculate the elasticity of demand for widgets with respect to its own price, the price of woozles, and income. (b) Over what range of prices is the demand for widgets elastic? (c) If the cost per widget is 10 and the manufacturer behaves as a monopolist, how many widgets will be sold and at what price: (d) By how much must the price of widgets change if there is a 1% decrease in per capita income and the goal is to keep QX constant.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 6E
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Transcribed Image Text:The demand for Widgets (QX) is a function of the price of widgets (PX), the price of woozles
(PY), and per capita income (1): QX = 1950 - 10 PX + 5 PY-0.11 Currently, PX = 25, PY = 10,
and 1 = 15,000. (a) Calculate the elasticity of demand for widgets with respect to its own
I
price, the price of woozles, and income. (b) Over what range of prices is the demand for
widgets elastic? (c) If the cost per widget is 10 and the manufacturer behaves as a
monopolist, how many widgets will be sold and at what price: (d) By how much must the
price of widgets change if there is a 1% decrease in per capita income and the goal is to
keep QX constant.
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