Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 10, Problem 13QP
To determine
The reason for coupons that tend to be more common on small-ticket items than big-ticket items.
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Airlines charge a lower price to people who buy their tickets two weeks in advance than they do to people who buy their tickets two days in advance. Explain why. On the other hand, Broadway theaters charge a lower price to people who buy a ticket just before the show begins that to people who buy their tickets weeks in advance. Explain the difference.
What if a new restaurant entry increased consumer elasticity of demand for the sushi appetizer from 2 to 3? The price you charge initially was $10. By how much do you have to adjust the price? Will you still be able to make a profit?
Show/explain step by step.
Elasticity in the real world—sort of. The managers of a scholarly journal that I edit were thinking of raising the subscription prices. We used to charge individuals $32 for four issues per year and libraries $52 for the same. The managers proposed raising the prices to $45 and $75, respectively. My feeling was that these increases were too small, especially since the prices of substitutes (scholarly journals of a quality similar to ours) were much higher. I suggested that we charge $50 and $85, respectively. I believed that was more sensible, since the demand is quite inelastic over this price range, so with a larger price increase our total revenue would rise further. Apparently the managers agreed, and we raised our prices by the larger amount. Next year our revenue rose, suggesting that my guess about the elasticity of demand was correct.
Why do you think the journal charges different prices to libraries?
Do individuals have a higher or lower elasticity of demand than libraries?…
Chapter 10 Solutions
Microeconomics
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.3 - Prob. 4STCh. 10.5 - Prob. 1STCh. 10.5 - Prob. 2STCh. 10.5 - Prob. 3ST
Ch. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Is there a deadweight loss if a firm produces the...Ch. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNG
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- Suppose that a new restaurant entry increased consumer elasticity of demand for the sushi appetizer from 2 to 3. The price you charge initially is $10. By how much will you have to adjust the price? Will you still be able to make profit?arrow_forwardThe pharmacy has switched wholesalers for its over the counter medication and it wants to get rid of its old inventory. Normally the pharmacy selles its generic ibuprofen for 7 pesos but is offering a flat-rate discount of 2.50 pesos. What is the selling price?arrow_forwardRefer to Example 10.3 - 'Markup Pricing: Supermarkets to Designer Jeans' a. Why do small convenience stores which are often open 24-7 typically charge higher prices than supermarkets? b. Why are designer label jeans typically more expensive than 'mass-market' jeans?arrow_forward
- If another phone service provider enters the market and forces Connecting U to drop the price of a gigabyte down even further than $16- let's say they drop it by an additional 22.2%- what will probably happen to your quantity demanded of data? a) my quantity demanded will increase, but by less than 40% b) my quantity demanded will increase by more than 40% c) my quantity demanded will decrease by more than 40% Note- Connecting U first dropped their price from $20 to $16 causing the price for a gigabyte of data to drop by 22.2% and a 40% increase in quantity demanded.arrow_forwardMany restaurants think that Buffets can give more revenue compared to normal food servings.arrow_forwardWhy Mall Store retailers place their most expensive products right in the entry way of the store, where consumers will see them first, and place their more popular, better-selling items further back.arrow_forward
- The airline’s use of demand pricing results in passengers paying different prices for essentially the same seat. What is the benefit of this practice to the airline and to the passengers? What is the drawback to the airline and the passengers? Do you think this practice should be continued? If not, what would be the best alternative?arrow_forwardAn end-of-aisle price promotion changes the price elasticity of a good from -2 to -3. Suppose the normal price is $33 , which equates marginal revenue with marginal cost at the initial elasticity of -2. What should the promotional price be when the elasticity changes to -3 ? ( Hint : In other words, what price will equate marginal revenue and marginal cost?) a) $ 30.60 b) $25.50 c) $33.15 d)$ 35.70arrow_forwardHow will you recall price? List five other words that mean the same thing as price. Compare and contrast fixed and variable costs and give an example of each. Explain market-skimming and market-penetration pricing strategies. Why marketers of innovative high-tech products choose market-skimming pricing rather than market-penetration pricing when launching a new product? Justify your answer.arrow_forward
- If A New Breakthrough in Manufacturing technology reduces the cost of producing Blu-ray Players By Half what Will Happen to supply of blu-ray playersarrow_forwardExplain demand in easy languagearrow_forwardGeorge has been selling 5,500 T-shirts per month for $9.50. When he increased the price to $10.50, he sold only 4,500 T-shirts. What is the price elasticity of demand? What is the original price markup? Will you advise George to increase the price to generate more profits if the marginal cost per T-shirt is $6?arrow_forward
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