1.- The price elasticity of demand for imported whiskey is estimated to be -0.20 over a wide interval of prices. The federal government decides to raise the import tariff on foreign whiskey, causing its price to rise by 20%. Will sales of whiskey rise or fall, and by what percentage amount?

2.- In an article about the financial problems of the USA today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said that the paper should raise its price from .50 to .75, which he estimates would bring in an additional 65 million a year. The paper's publisher rejected the idea, saying that the circulation could drop sharply after the price increase, citing that the wall street journal's experience after it increased its price to .75.What implicit assumptions are the publisher and the analyst making about price elasticity?

Solution Preview

1. Price elasticity of demand for imported whiskey=Ep=-0.20
Change in price=+20% (positive sign indicates an increase in prices)
Change in demand=Change in sales of imported whiskey=Ep*change in prices=-0.20*20%=-4%
Negative sign indicates fall in sales. Sales of imported whiskey will fall by 4%.

2. ...

Solution Summary

There are two problems. Solution to first problem predicts the change in sales of whiskey as a result of raise in import tariff. Solution to second problem lists the assumptions made by analyst and publisher about price elasticity of demand of news paper.

The market demand for cotton socks is given by:
Q=1,000+.5I-400P+200P'
where,
Q = Annual demand in number of pairs
I = Average income in dollars per year
P = Price of one pair of cotton socks
P' = Price of one pair of wool socks
Given that I = $20,000, P=$10, and P'=$5, determine:
A. Theprice elasticity, e(Q,P)
B

Estimate of the demand function for household furniture
F = 0.0036Y^1.08*R^0.16*P^−0.48
R^2 = 0.996
Where:
F=furniture expenditures per household
Y=disposable personal income per household
R=value of private residential construction per household
P=ratio of the furniture price index to the consumer price index
Qu

Please assist with parts: a,b,c,d,e
Thank you!!!
*Use this information to answer the questions that follow.
Market researchers at Chrysler estimated the demand for their new Chrysler Crossfire sports cars as follows:
QC = 1,050,000 - 95PC + 14.25M + 60PBMW + 25PP
Where QC is the quantity of Chrysler Crossfires

The accompanying table lists the cross-priceelasticities of demand for several goods, where the percent price change is
measured for the first good of the pair, and the percent quantity change is measured for the second good.
a. Explain the sign of each of the cross-priceelasticities. What does it imply about the relatio

If income declines by 2.85 percent, how much do I have to cut price in order to maintain existing customers?
It starts with being given a regression analysis that has the following: coefficient of the intercept is .45, the coefficient of the natural logarithm of price is -2.14, and the natural logarithm of income is .90. Bas

Suppose the demand for beer is characterized by the following point elasticities:
own price elasticity = -2.5
cross-price elasticity with soda = +3
income elasticity = +2
Based on the given elasticities, answer the following. Explain your answers.
a. If a firm in the industry wishes to increase total sales revenue (ignori

Different products have different elasticities. Heart medication, for example, is inelastic and corn is elastic. Find a product that has not already been selected and describe theprice elasticity and income elasticity. How much control might an organization have over pricing based on a product's elasticity? Discuss which of the

Suppose that the demand for Dell laptop computers) can be characterized by the following point elasticities: (own) price elasticity = -1.9, cross-price elasticity with computer printers = -2, and income elasticity = +1.1. Based on these numbers answer the following questions. Explain your answers and show your work.
a.If t

Using the "arc formula" and the data from the table below, compute where possible the own- price and income elasticities of demand. (remember that these elasticities are computed holding all other variables constant).
Price quantity price of related goods income
$10 600 $20