Principles of Macroeconomics (11th Edition)
11th Edition
ISBN: 9780133023671
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 4, Problem 8P
To determine
To show the changes in price and demand-supply equilibrium using a graph.
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Principles of Macroeconomics (11th Edition)
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- You run a small business and would like to predict what will happen to the quantity demanded for your product if you raise your price. While you do not know the exact demand curve for your product, you do know that in the first year you charged $53 and sold 901 units and that in the second year you charged $42 and sold 1,186 units. If you plan to lower your price by 10 percent, what would be a reasonable estimate of what will happen to quantity demanded in percentage terms? Incorporate the point elasticity of demand using the initial price and quantity in your answer.arrow_forwardOnline the timing and tailoring of prices to specific products is the key to successful pricing in online markets. And " Thanks to the ready availability of data in online markets, a pricing manager can easily approximate the elasticity of demands for the different products it sells online." Assuming a 10 percent decrease in price increases sales by 30 percent, calculate the price elasticity of demand? If the wholesale price of the online product is $50 and sells at a price comparison site that charges $0.50 per click and boasts a conversation rate of 5 percent ( an average of 20 percent clicks are needed to generate sale), the incremental cost of each sale is $50. What price should you change for the product? What is the markup? B) . The authors assert that price sensitivity is affected by (1) product cycle, and (2) number of competitors. In fact, " When the number of competing sellers doubles, a firm's elasticity of demand is expected to double ( you should be able to verify this…arrow_forwardBeachfront resorts have an inelastic supply, and automobiles have an elastic supply. Suppose that a rise in population doubles the demand for both products (that is, the quantity demanded at each price is twice what it was). Which product experiences a larger change in quantity? What happens to total consumer spending on each product?arrow_forward
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