EBK MICROECONOMICS
5th Edition
ISBN: 9781118883228
Author: David
Publisher: YUZU
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Question
Chapter 2, Problem 2.21P
To determine
(a)
To calculate Price
To determine
(b)
To calculate price elasticity of demand for air travel between Chicago and Dallas when both airlines charges a price of $300
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Suppose that the market for air travel between Chicago and Dallas isserved by just airlines, United and American. An economist has studied thismarket and has estimated that the demand curves for round-trip tickets foreach airline are as follows:QdU = 10,000 - 100PU + 99PA (United’s demand)QdA = 10,000 - 100PA + 99PU (American’s demand) where PU is the pricecharged by United, and PA is the price charged by American.a. Suppose that both American and United charge a price of $300 each for around-trip ticket between Chicago and Dallas. What is the price elasticityof demand for United flights between Chicago and Dallas?b. What is the market-level price elasticity of demand for air travel betweenChicago and Dallas when both airlines charge a price of $300? (Hint:Because United and American are the only two airlines serving theChicago–Dallas market, what is the equation for the total demand for airtravel between Chicago and Dallas, assuming that the airlines charge thesame price?)
Suppose that you are a staff economist with an economic consulting firm. The operator of a local harbour has commissioned your firm to do a market analysis of the demand for berths (parking spaces) for boats. Your firm finds that the price elasticity of demand for berths is –0.8.
If the price of a berth in the area decreases by 6%, how will the quantity of berths that people demand change? The number of berths demanded will:
Increase by 0.8%
Decrease by 7.5%
Increase by 6%
Increase by 4.8%
Shell has over 13,000 gas stations in the United States. In addition to gasoline, the gas stations also sell convenience items, such as snacks, non-alcoholic beverages, wine, beer, and hot food. Suppose you work for a gas station and your boss asks you to develop a pricing strategy for bottled local wine. The demand function is ? = 100 – 4?, where ? is the monthly quantity demanded of the bottled wine and ? is the price of the bottled wine. The marginal cost per bottle of wine is $5. Complete the following tasks:
1) (Calculating) In the worksheet “Q2 Calculations” of the provided Excel file, enter formulas in columns B-D to calculate Q (quantity demanded), MC (marginal cost), and MR (marginal revenue). Please round your results to one decimal place. Note that the inverse demand function is ? = 25 − 0.25? and that the MR function can be derived from the inverse demand function using the formula introduced in Module 5. You may find it helpful to review the Excel file for Chapter 11.
Chapter 2 Solutions
EBK MICROECONOMICS
Ch. 2 - Prob. 1RECh. 2 - Prob. 2RECh. 2 - Prob. 3RECh. 2 - Prob. 4RECh. 2 - Prob. 5RECh. 2 - Prob. 6RECh. 2 - Prob. 7RECh. 2 - Prob. 8RECh. 2 - Prob. 9RECh. 2 - Prob. 10RE
Ch. 2 - Prob. 2.1PCh. 2 - Prob. 2.2PCh. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Prob. 2.5PCh. 2 - Prob. 2.6PCh. 2 - Prob. 2.7PCh. 2 - Prob. 2.8PCh. 2 - Prob. 2.9PCh. 2 - Prob. 2.10PCh. 2 - Prob. 2.11PCh. 2 - Prob. 2.12PCh. 2 - Prob. 2.13PCh. 2 - Prob. 2.14PCh. 2 - Prob. 2.15PCh. 2 - Prob. 2.16PCh. 2 - Prob. 2.17PCh. 2 - Prob. 2.18PCh. 2 - Prob. 2.19PCh. 2 - Prob. 2.20PCh. 2 - Prob. 2.21PCh. 2 - Prob. 2.22PCh. 2 - Prob. 2.23PCh. 2 - Prob. 2.24PCh. 2 - Prob. 2.25PCh. 2 - Prob. 2.26PCh. 2 - Prob. 2.27PCh. 2 - Prob. 2.28PCh. 2 - Prob. 2.29PCh. 2 - Prob. 2.30P
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