Managerial Economics
5th Edition
ISBN: 9781337681599
Author: Luke M. Froeb; Brian T. McCann; Michael R. Ward
Publisher: Cengage Limited
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Chapter 9, Problem 9.2IP
To determine
The responses of the beer distributors and snack food vendors on the legalization of marijuana.
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Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?
i) Suppose that new entry decreased your demand elasticity from –2 to –3 (made demand more elastic). By how much should you adjust your price of GHS10?
ii)The pricing model for iTunes has been to price songs individually. Instead, Pandora opted to offer unlimited song playing for a monthly fee. Would Pandora’s pricing model likely yield more profit than pricing songs individually?.
Suppose that a new entry has decreased your demand elasticity from –2 to –3 (made demand more elastic) and that your price, before the new entry, was $30.
You should adjust your price to ________ due to the new entry and decreased demand elasticity.
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