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Discussing Price Elasticity of Demand

What is "Price Elasticity of Demand" and how do you calculate it? What are the three different types that price elasticity is broken down into? What questions would you suggest to the CFO to ask to the marketing department and what is your recommendation to the CFO?

Supply and Demand: Markets, Prices and Price Setting

1. Explain what happens to price and quantity of coffee when the following events occur: a. An advertising campaign highlights scientific studies that find drinking coffee can help reduce weight gain. b. Coffee plants from major producing countries are affected by drought. (fun fact: a coffee bean is a misnomer for the seed

Inelastic, Elastic, and Unitary Price

As the research starts to come in about your expansion opportunities abroad, the marketing department has discovered that the price elasticity for CPI's products in Brazil is expected to be much greater than in current markets served. Separately, your CFO sent you an e-mail earlier in the week stating that depending on how much

Estimating the price elasticity coefficients

Using the midpoints formula, calculate the elasticity coefficient for each price level, starting with the coefficient for the Price Quantity Total Elasticity Elastic or Demanded Revenue Coefficient Inelastic $4 100

Calculating the needed change in price of own product

XYZ Corporation is a manufacturer of widgets. Over the past several months, it has been selling its widgets for $100 each and unit sales have averaged 5,000 units per month. This month its competitor, ABC, Inc. raised the price of its widgets from $100 to $110. XYZ noted that its unit sales increased by 200 units. A. What is

Elasticity and Price Discrimination

Elasticity and Price Discrimination: Evidence from Sam's Club and CVS An Example In a recent New York Times article, "Sam's Club personalizes Discounts for Buyers" (May 30 2010), the reporter Andrew Martin talks about an innovative discount idea from Sam's Club, the warehouse chain of Wal-Mart. He describes a new program

Price Elasticity in Given Situations

1. Consider the following description of a pricing decision by a book publisher: A publisher may have issued a monograph several years ago, when both costs and book prices were lower, and priced it at $14.95. The book is still selling reasonably well and would continue to do so at $19.95. Why not, then, raise the price? The o

Analysis of Demand Curve

You are hired as a consultant to a president of a liberal arts college in the East. You are asked to evaluate a recommendation by the college's Admissions Director, Susan Hansen, to increase tuition and to reduce financial aid to students. Susan argues that the data from competing colleges suggest that the demand curves for coll

Point price, income and cross elasticities

The McNight Company is a major producer of steel. Management estimates that the demand for its steel is given by the equation: Qd = 500 - 1000P + 0.1Y + 300Pa, where Q = steel demand in thousands of tons per year, P = price of steel in dollars per pound, Y is income per capita, and Pa is the price of aluminum in dollars per pou

Price elasticity in relation to competitors

Sailright Inc. manufactures and sells sailboards. Management believes that the price elasticity of demand is -3.0. Currently, boards are priced at $500 and the quantity demanded is 10,000 per year. A. If the price is increased to $600, how many sailboards will the company be able to sell each year? B. The cross-price elas

Golden Star Winery Case

Golden Star Winery produces mid level wines consumed primarily in North America. Given below is the projected income statement for the company for 2011. Projected Income Statement (2011) Sales (100,000 cases at $7 per case) $700,000 Cost of goods sold: Materials

Questions on Elasticity

1. Using the supply and demand model, explain what would happen to the supply curve during a drought. Also explain the affect on the price of water. 2. Name a relatively inexpensive product that you purchase on a regular basis. If the price of that product increased by 25% how would you react? Why is your response elastic or

Demand Analysis for Robinson Plastics.

Robinson Plastics makes clear plastic products with injection molding techniques. Their latest invention is a plastic cup with a sharp blade mounted inside to cut prescription pills into small pieces. The cup is placed over the pill and as the cup is pressed down, the pill is split into pieces which are contained inside the cup.

Interpret the coefficients in the estimated regression equation.

We believe that the quantity of hamburger (Qh) purchased within a market is a function of its own price (Ph), the price of chicken (Pc), advertising expenditures (A) and household disposable income (I). Using data available to the research team, we have estimated the following linear regression relationship: Qh = 205.2 - 200

Cross-Price Elasticity

I need help with answering these questions: Suppose the demand for Apple iPhones is characterized by the following point elasticities: (own) price elasticity = -.12, cross-price elasticity with Blackberry phones = +.03, and income elasticity = 1.5. Based on these numbers, answer the following questions. Explain your answer

Elasticity Concepts - Studying the effect of changes in variables on sales

You are the manager for Dunkin Donuts and know the following elasticities: n= 1.5 nI = 1.2 nxy1 = 0.5 nxy2 = -0.5 n is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, nxy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, nxy2 is the

Price Elasticity of Demand Concepts

See the attached file. 1. Consider an inverse demand function p=40-q/5 (a) Find the price elasticity when price is $5. (b) Find the price at which elasticity is -0.6. (c) Suppose you are currently producing 125 units. If you raise your quantity a little bit, will your revenue increase or decrease? Using elasticity concept,

Pricing Behavior

Research the tiered pricing behavior of pharmaceutical and airline firms and address the following: 1. Give examples of how each industry practices price discrimination. 2. What are the short and long term strategic reasons these industries employ tiered pricing? 3. What impact does price discrimination h

Transportation Economics

The research department of CFC Railboard estimated the following regression for the demand for its transportation services. Qx=1-2Px+1.5I+0.8Py-3Pz+1Adv Where Qx=quantity of CFC transport in millions of ton-miles per year. Px=the price of CFC transport in dollars per ton-mile. Py=the price of Union Atlantic rail transport

Managerial Economics: Demand for Starbucks Products

You work for Starbucks and know the following elasticities: Ep=1.2 EI=2 Exy1=0.4 Exy2=-0.6 Ep is the price elasticity of demand for a Starbucks Tall Caramel Macchiato, Exy1 is the cross elasticity of demand between a Starbucks Tall Caramel Macchiato and Java City's Large Caramel Javalanche, Exy2 is the cross elasticity of

Price Elasticity of Demand

DQ1: Elasticity. Find the real life elasticity in the attached power point slides. Based on the elasticity of demand, discuss one of the products: a) Is it elastic, unit elastic (~ -1), or inelastic? b) If something happened to reduce supply and resulted in a 10% increase in price, what would the % change be to quantity? c)

Managerial Economics

Brown guitar company hires you to consult and you estimate the demand for guitars to be Q=9000-6P. The supply of guitars is given by Q= -3000+9. 1 What is the equilibrium price and quantity of guitars? 2 What is the price elasticity of demand at the equilibrium price and quantity? 3 What is the price elasticity of suppl

Monopolistic Competition

Gray Computer Inc located in Colorado Springs, Colorado is a privately held producer of high speed electronic computers with immense storage capacity and computing capability. Although Gray's market is restricted to industrial users and a few large government agencies (e.g., Department of Health, NASA, and the National Weather S

Using the Midpoint Formula of Price Elasticity of Supply

Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit-elastic (Es=1.0). So how many popsicles will be sold each day in the short run if the price rises to $2 each? In the long run, if

Demand is determined.

1. A retail store faces a demand equation for Roller Blades given by Q=180-1.5P, Where Q is the number of pairs sold per month and P is the price per pair in dollars. (1)The store currently charges P=$80 per pair. At this price, determine the number of pairs sold. (2)If management were to raise the price to $100,

Elasticity Concept Applied to Landfill Project

Local governments that operate their own landfills face a trade-off. Landfills are unpopular and officials worry about filling them up too fast. Once filled, the politically undesirable task of what to do with new garbage comes to the fore. Should it be shipped out of the region, angering those who are the recipients? Or, sh

Solving a Numerical on Elasticity of Demand

The demand schedule for the product 'xyz' is given below: Price($) Quantity demanded 3 20 4 15 5 11 6 9 7 7 Task: Based on the above data, solve the questions given below: Compute the point price elasticity of demand for an increase in the p