Purchase Solution

Price Elasticity of Demand and Determination of Price

Not what you're looking for?

Ask Custom Question

You are a CEO of Ace Widget Co. You are certain that the price elasticity of demand for your product is 1/2. Your chief economist tells you to increase your product's price. Do you follow his advice or fire him? Fully explain.

Purchase this Solution
Solution Summary

This solution discuses whether or not one would follow the advice of a chief economist.

Solution Preview

By definition, price elasticity of demand is a measure of the responsiveness of the quantity that consumers demand for a good when the price of the good in question changes. When a small change in price is accompanied by a large change in the amount demanded, the product is said to be elastic. However if a large change in price is ...

Solution provided by:
Edwin Sinclar, MBA
Education
  • MBA, Aspen University
  • Bachelor of Science , Berea College
Recent Feedback
  • "Thank u"
  • "Thank You!"
  • "Thanks!"
  • "Thank you so much"
  • "Great job...thanks."
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Economics:Demand and supply,price elasticity.

    The solution is clear and concise. Thank you. The problem set requires the determination of price elasticity at different levels of pricing.

  • Price and Output Determination

    511741 Price and Output Determination Why is advertising prevalent in many oligopolies, especially when industry demand is inelastic?

  • Regression and Price Elasticity

    Evaluate this model by computing the coefficient of determination and by performing a t-test of the significance of the price variable. c. What is the price elasticity of demand at a price of 50 cents?

  • Estimating the Cost of Optical Sensors Based on the Resolution of the Sensor

    545512 Estimating the Cost of Optical Sensors Based on the Resolution of the Sensor 1. Compute the price elasticity of demand for paint and show your calculations.

  • Optimal markups and prices

    The solution contains the determination optimal markups and prices under third-degree price discrimination using elasticity of demand and marginal cost.

  • ELASTICITY OF DEMAND

    Importance in Factor pricing: The concept of elasticity also has practical importance in the field of factor price determination.

  • Price elasticity of stockpiled lobster

    The effects of new technology on the elasticity of long-run supply; stockpiling of lobsters affects long-run supply; determination of price elasticity of supply

  • Regression Analysis

    Income elasticity coefficient is between 0 and 1. It is normal good. Interpreting R square We get coefficient of determination equal to 0.98388604.

  • Price Elasticity of Demand Exercise

    This is the main point of the exercise. Thank you for using BrainMass. Calculation of price elasticity of demand and determination of luxury vs necessity goods. Finding total revenue and relating this to elasticity.

View More Related Solutions