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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
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Question
Worldwide annual sales of smart phones in over a five-year period were projected to be approximately
q=-10p+4440 million phones at a selling price of $P per phone.
Obtain a formula for the price of elasticity of demand E.
In one particular year the actual selling price was $271 per phone. What was the corresponding price elasticity of demand ?
Use your formula for E to determine the selling price that would’ve resulted in the largest annual revenue. What, nearest to the nearest 10 million, would have been the resulting annual revenue?
![**Tutorial Exercise**
---
Worldwide annual sales of smartphones in over a 5 year period were projected to be approximately
\[ q = 10^6p^{-1} + 4.440 \]
million phones at a selling price of $p per phone.
### (a) Obtain a formula for the price elasticity of demand \( E \).
### (b) In one particular year the actual selling price was $271 per phone. What was the corresponding price elasticity of demand? Interpret your answer.
### (c) Use your formula for \( E \) to determine the selling price that would have resulted in the largest annual revenue. What, to the nearest $10 million, would have been the resulting annual revenue?](https://content.bartleby.com/qna-images/question/61d8df79-6fd2-494a-bfde-d732d93e5033/e4601f12-b98d-4135-b639-bd9ebc9782e7/pt7f7nq_thumbnail.jpeg)
Transcribed Image Text:**Tutorial Exercise**
---
Worldwide annual sales of smartphones in over a 5 year period were projected to be approximately
\[ q = 10^6p^{-1} + 4.440 \]
million phones at a selling price of $p per phone.
### (a) Obtain a formula for the price elasticity of demand \( E \).
### (b) In one particular year the actual selling price was $271 per phone. What was the corresponding price elasticity of demand? Interpret your answer.
### (c) Use your formula for \( E \) to determine the selling price that would have resulted in the largest annual revenue. What, to the nearest $10 million, would have been the resulting annual revenue?
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- Review Question 1.2, If a 13 percent increase in the price of Cap'n Crunch cereal causes a 22 percent reduction in the number of boxes of cereal demanded, what is the absolute value of the price elasticity of demand calculation for Cap'n Crunch cereal? Epl= (Enter a numeric response using a real number rounded to two decimal places.) The demand for Cap'n Crunch isarrow_forwardGiven the table of elasticity estimates and price increases, calculate the percentage decrease in unit sales and then predict if total revenue should increase or decrease based on your calculations. Instructions: Enter your responses as a percentage rounded to one decimal place if necessary. Do not include a negative sign (-) with your answers. Degree of Elasticity Relatively elastic (E > 1) Airline travel, long run Unitary elastic (E = 1) Shoes Relatively inelastic (E< 1) Coffee v Estimate V 2.4 0.9 0.3 Decrease in Quantity Demanded Increase in Price (%) (%, do not include a negative sign) 20% 20% 20% Given the increase in price and your calculated percentage change in quantity demanded, what is the predicted impact on total revenue in each market? Airline Travel: total revenue will slightly decrease ✓ Shoes: total revenue will decrease Coffee: total revenue will decrease 21.6% 90.0% 81.0%arrow_forwardWorldwide annual sales on smart phones over a two year period were approximately q=-5p+3090 million phones at the selling price of $p per phone. (a) obtain a formula for the price elasticity of demand E. E=______ (b) in one of the years the actual selling price was $355 per phone. What was the corresponding price elasticity of demand? E=______ The demand is going (up/down) by about _____% per 1% increase in that price level.arrow_forward
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