Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 6.5.5PA
To determine
What must be true of the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose the figure to the right illustrates the monthly demand for imported rugs at
a local rug gallery. Suppose the price of rugs increases from $5,500 to $6,500.
10,000
9,000-
Total revenue before the price change is S (Enter your response as an integer.)
Total revenue after the price change is $
(Enter your response as an integer.)
8,000-
7,000-
The change in total revenue is $
include a minus sign if appropriate,)
(Enter your response as an integer and
6,000-
The demand for imported rugs at this rug gallery is
V over the given
5,000-
price range.
4,000-
3,000-
Demand
2,000-
1,000-
0-
10 20 30
40 50 G0
70 80
90 100
Ouanti
Rent (dollars per month)
U U U
Consider the markets for widgets and cogs. You study survey data and observe that if widgets cost $5, then 100 widgets are demanded. You also observe that if widgets cost $3, then 150 cogs are demanded and if widgets cost $4 then 100 cogs are demanded. Given the information, determine and explain which types of elasticity of demand you are able to calculate, and then calculate using the two types of methods to calculate elasticity of demand. After calculating, please interpret the calculations.
Price elasticity of demand is a relationship between price and quantity demanded. Total Revenue to a firm is Price multiplied by Quantity. So it should not be a surprise that there is a relationship between price elasticity of demand and changes in total revenue as we move along a demand curve.
Imagine that you work at a theater, and there is a meeting concerning how to best increase the total revenue coming into the theater. One group is arguing that the way to increase total revenue is by reducing the ticket price, while the other group is arguing that the way to increase revenue is to increase the ticket price.
Chapter 6 Solutions
Microeconomics (7th Edition)
Ch. 6 - Write the formula for the price elasticity of...Ch. 6 - If a 10 percent increase in the price of Cheerios...Ch. 6 - Prob. 6.1.3RQCh. 6 - Prob. 6.1.4RQCh. 6 - Prob. 6.1.5PACh. 6 - Prob. 6.1.6PACh. 6 - Jacob Goldstein, a correspondent for National...Ch. 6 - Prob. 6.1.8PACh. 6 - In 1916, Ford Motor Company sold 500,000 Model T...Ch. 6 - Prob. 6.1.10PA
Ch. 6 - What are the key determinants of the price...Ch. 6 - Prob. 6.2.2RQCh. 6 - Prob. 6.2.3PACh. 6 - According to a news story about the bus system in...Ch. 6 - Prob. 6.2.5PACh. 6 - The price elasticity of demand for crude oil in...Ch. 6 - Prob. 6.2.7PACh. 6 - Prob. 6.3.1RQCh. 6 - Prob. 6.3.2RQCh. 6 - Prob. 6.3.3PACh. 6 - Prob. 6.3.4PACh. 6 - Prob. 6.3.5PACh. 6 - Prob. 6.3.6PACh. 6 - Prob. 6.3.7PACh. 6 - Prob. 6.3.8PACh. 6 - Prob. 6.3.9PACh. 6 - Prob. 6.3.10PACh. 6 - Prob. 6.3.11PACh. 6 - Prob. 6.3.12PACh. 6 - Prob. 6.4.1RQCh. 6 - Prob. 6.4.2RQCh. 6 - Prob. 6.4.3PACh. 6 - Prob. 6.4.4PACh. 6 - Prob. 6.4.5PACh. 6 - Prob. 6.4.6PACh. 6 - Prob. 6.4.7PACh. 6 - (Related to the Apply the Concept on page 199) The...Ch. 6 - Prob. 6.4.9PACh. 6 - Prob. 6.5.1RQCh. 6 - Prob. 6.5.2PACh. 6 - (Retated to Solved Problem 6.5 on page 200)...Ch. 6 - Prob. 6.5.4PACh. 6 - Prob. 6.5.5PACh. 6 - Prob. 6.5.6PACh. 6 - Prob. 6.5.7PACh. 6 - Write the formula for the price elasticity of...Ch. 6 - Prob. 6.6.2RQCh. 6 - Prob. 6.6.3PACh. 6 - Prob. 6.6.4PACh. 6 - Prob. 6.6.5PACh. 6 - Use the midpoint formula for calculating...Ch. 6 - Prob. 6.6.7PACh. 6 - Suppose that on most days, the price of a rose is...Ch. 6 - Use the graph of the market for basketball tickets...Ch. 6 - Prob. 6.2CTE
Knowledge Booster
Similar questions
- Your company receives 40 excess copies of a book. You plan to sell these books in two markets: directly in the store or sell them on ebay. Here are the two demand equations: Store Demand: P_S = 200 – 2Q_S PS=200–2QS Ebay Demand: P_E = 250 – 5Q_E PE=250–5QE If your goal is to maximize total revenue, how many books will you sell on ebay?arrow_forwardYou were gifted a box of 50 thermos bottles that you do not need and you plan to sell them on Ebay. You were initially thinking of asking for $20 per bottle, but then you found out that demand is elastic at $20. Should you lower your asking price? Yes, because when demand is elastic, a lower price increases revenue. Yes, because when demand is inelastic, a lower price increases revenue. No, because when demand is inelastic, a lower price increases revenue. No, because when demand is elastic, a higher price increases revenue.arrow_forwardIn “A Former Crack Dealer on the Economics of Drugs,” they mention demand for crack is inelastic. Draw a supply and demand curve and show how total revenue changes when there is a decrease in supply. How is this related to the fact that drugs are illegal? That is, what would happen to total revenue if drugs were made legal?arrow_forward
- According to a recent study, the elasticity of the supply of residential real estate in Nicosia is 1.4 and in Limassol 1.9. If we assume that in 2022 the demand for residential real estate will increase by 8% in both cities and that the supply will remain stable in both cities, how will the prices of residential real estate in both cities be affected. Will they be affected in the same way or differently? If they are affected differently, explain how the effect on prices will differ in the two cities and why.arrow_forwardNeed number 4 and 5 answered Elasticity: What is elasticity? Elasticity refers to the concept that provide information about the sensitivity or responsiveness of one variable to another. What is Price Elasticity of Demand? Price elasticity of demand is the responsiveness of consumers in term of quantity demanded with respect to the price change. It explains that how much quantity demanded changes with the change in the price by 1percent. What is the formula that we will use to calculate it? The formula to calculate price elasticity of demand would be: =Percentage change in quantity demanded/percentage change in price After calculating the Coefficient of Price Elasticity of Demand, what are the rules we use to characterize that price range? (i.e., What importance does the number one play?) What is the total revenue test?arrow_forward← Use the graph to the right for Yolanda's Frozen Yogurt Stand to answer the questions that follow. Use the midpoint formula to calculate the price elasticity of demand for D, between point A and point C and the price elasticity of demand for D₂ between point A and point B. Price elasticity of demand for D, = (Round your response to two decimal places. Be sure to include the minus sign as needed.) Price elasticity of demand for D₂ = (Round your response to two decimal places. Be sure to include the minus sign as needed.) Which curve is more elastic? Suppose Yolanda is initially selling 100 cones per day at a price of $2.50 per cone. If she changes her price to $1.50 per cone and her demand curve is D,, what will be the change in her revenue? $(Round your response to two decimal places. Be sure to include the minus sign as needed.) What will be the change in her revenue if her demand curve is D₂? $(Round your response to two decimal places as needed.) per cone) Price (dollars 4.00 3.75-…arrow_forward
- The equilibrium price of televisions fell significantly in the past month, however the equilibrium quantity remained unchanged. Three individuals provided an explanation for the situation. Which explanation(s) could be correct? Explain your logic. Mark: Demand increased, but supply was totally inelastic. Shawn: Supply increased, but so did demand. Annica: Supply decreased, but demand was totally inelastic For each of the following pairs of goods, which good would you expect to have more elastic demand and why? Required textbooks or fictional novels Allison Hinds music recordings or soca music recordings in general Airfare during the next 4 months or airfare during the next 5 years Fruit juice or water Tracey usually pays a price between $6 and $10 per pound of rice. Her monthly total expenditure on rice increases as the price decreases. What does this imply about her price elasticity of demand for rice?arrow_forwardSuppose 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%arrow_forwardWhich of the following is the best example of the concept of demand? Your car breaks down and you consider how to deal with the fact that you no longer have transportation Since you cannot get to school today, you are considering skipping class You are thinking about getting a new car, and really like the new Ford Bronco. You really like the new Ford Bronco, but don't have the $45,000 to buy one, so instead, you decide to get a used SUV that costs $15,000. None of the above is a good example of demand.arrow_forward
- The figure to the right illustrates the demand for taxi rides in a large city. Suppose the price per ride is initially $50 but then falls to $5 due to a recession. What is the price elasticity of demand for taxi rides? Using the midpoint formula, the price elasticity of demand is (Enter your response rounded to two decimal places.) Price (dollars per taxi ride) 60- 55- 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- 0- 0 A B D 40,000 80,000 120,000 160,000 200,000 240,000 Quantity (taxi rides per day) Qarrow_forwardChoose a good or service you are familiar with. It should be something that is currently available for purchase. If your classmates would be unfamiliar with this good or service, provide a brief description. Initial Response: Complete all items below: 1) Choose the most likely demand shifter (the things that shift demand) for your product and explain why and how the demand curve is most likely to shift if there is a change in that demand shifter. If the demand curve shifts in the way you are suggesting, what will happen to equilibrium price and quantity? 2) Choose the most likely supply shifter (the things that shift supply) for your product and explain why and how the supply curve is most likely to shift if there is a change in that supply shifter. If the supply curve shifts in the way you are suggesting what will happen to equilibrium price and quantity? 3) If both the supply and demand curves shift in the way you suggested in #1 & #2 above, what will happen to equilibrium…arrow_forwardUse the following demand and supply functions to answer the following question. a) Demand: Qd=600 - 30P Supply: Qs= -300 + 120P If the price is currently 4 there is a b) Demand: Qd=600 - 30P Supply: Qs= -300 + 120P If the price is currently 8 there is aarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education