Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 5, Problem 19APA
(a)
To determine
Identify the values of
(b)
To determine
Identify the efficiency and inefficiency in the market.
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Good or Service
Price Elasticity
Income Elasticity
Beef
-0.5
0.51
Long Distance Telephone
-0.32
1.2
Cigarettes
All smokers
-0.7
0.9
Ages 15-18
-1.4
1.5
What will happen to sales for long-distance telephone if its price increases by 5% and income increases by 8%?
Select one:
a. Sales will decrease by 5%.
b. Sales will increase by 5%.
c. Sales will decrease by 8%.
d. Sales will increase by 8%.
1. Your younger brother needs $600 to buy a new computer. He has opened a sandwich
stand to make the money he needs. Your father is paying for all of the ingredients. He
currently is charging $2 per sandwich, but he wants to adjust his price to earn the $600
faster. If you know that the demand for sandwich is elastic, what is your advice to him?
Explain.
Assume that you own a local brewery and that you sell 12 packs of your beer for $10 each. You hire a consultant to help you improve your business and she shows you that the price elasticity for your beer is 0.85. If your goal is to maximize your income/revenue, what should you do?
2. You run a hotel and you have determined that if you lower the price of your rooms 15% you will be able to rent 20% more rooms each month
a.What is your price elasticity of demand for hotel rooms?
b. If you want to maximize your revenue from renting out hotel rooms, what, if any changes should you make to the price?
3. Which product likely has a more in elastic demand, a movie ticket or lifesaving medication? Why?
4. If new substitutes are developed for a product, what will likely happen to the demand curve for that product?
5. If new substitutes are developed for a product, what will likely happen to the total revenue maximizing price for that product?
Chapter 5 Solutions
Macroeconomics
Ch. 5.1 - Prob. 1RQCh. 5.1 - Prob. 2RQCh. 5.1 - Prob. 3RQCh. 5.1 - Prob. 4RQCh. 5.2 - Prob. 1RQCh. 5.2 - Prob. 2RQCh. 5.2 - Prob. 3RQCh. 5.2 - Prob. 4RQCh. 5.2 - Prob. 5RQCh. 5.2 - Prob. 6RQ
Ch. 5.3 - Prob. 1RQCh. 5.3 - Prob. 2RQCh. 5.3 - Prob. 3RQCh. 5.4 - Prob. 1RQCh. 5.4 - Prob. 2RQCh. 5.4 - Prob. 3RQCh. 5.4 - Prob. 4RQCh. 5 - Prob. 1SPACh. 5 - Prob. 2SPACh. 5 - Prob. 3SPACh. 5 - Prob. 4SPACh. 5 - Prob. 5SPACh. 5 - Prob. 6SPACh. 5 - Prob. 7SPACh. 5 - Prob. 8SPACh. 5 - Prob. 9SPACh. 5 - Prob. 10SPACh. 5 - Prob. 11APACh. 5 - Prob. 12APACh. 5 - Prob. 13APACh. 5 - Prob. 14APACh. 5 - Prob. 15APACh. 5 - Prob. 16APACh. 5 - Prob. 17APACh. 5 - Prob. 18APACh. 5 - Prob. 19APACh. 5 - Prob. 20APACh. 5 - Prob. 21APACh. 5 - Prob. 22APACh. 5 - Prob. 23APACh. 5 - Prob. 24APACh. 5 - Prob. 25APACh. 5 - Prob. 26APACh. 5 - Prob. 27APA
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