1. Xerox Corporation develops, manufacturers, and services document equipment and software solutions worldwide. Assume the company offered $75 off the $1,475 regular price on the Phaser 6360, a durable high-speed color copier, and Internet sales jumped from 700 units to 800 units per week.
B. If marginal costs per unit are $650, calculate the profit-maximizing price-output combination.
2. The demand curve for a product is given by Qx = 1,000 - 2(Px) + .02(Pz), where Pz = $400.
A. What is the own price elasticity of demand when Px = $154? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $154?
B. What is the own price elasticity of demand when Px = $354? Is demand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price above $354?
C. What is the cross-price elasticity of demand between good X and good Z when Px = $154? Are goods X and Z substitutes or complements?
3. Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is -6. Determine how much consumption of this good will change if:
A. The price of good X increases by 5 percent.
B. The price of good Y increases by 10 percent.
C. Advertising decreases by 2 percent.
D. Income falls by 3 percent.
4. For the first time in two years, Big G raised cereal prices by 2 percent. If the volume of cereal sold by Big G dropped by 3 percent, what can you infer about the own price elasticity of demand for Big G cereal?
5. This year was prosperous for Starbucks Coffee. Revenues increased 9 percent. Suppose management attributes this revenue growth to a 5 percent increase in the quantity of coffee sold. If Starbucks' marketing department estimates the income elasticity of demand for its coffee to be 1.75, how will looming fears of a recession (expected to decrease consumers' incomes by 4 percent) impact the quantity of coffee ]Starbucks expects to sell?
The problems deal with key issues in economics: demand curve, supply curve etc.