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Managerial Economics - Elasticity Concepts

You have taken a job as pricing manager for a very fine men's clothing line that sells high-end, tailored shirts, suits, etc. The firm is interested in increasing its revenues. Because it is a "high-end" clothier, your boss does not what to have a "sale" on shirts or sweaters; he would actually rather increase the prices on ei

Price Demand Curves and Income Elasticity

1) In order to attract more customers on Mondays (A slow day), Alex's Pizza Shop in Austin decided to reduce the price of their pizza rolls from $3.50 to $2.50. As a result, Monday sales increased from 70 to 130. Also, Alex's sales of soft drinks rose from 40 to 90. a. Calculate the arc price elasticity of demand for the pi

Economics Demand Function

Please answer the economics questions below and show how you were able to solve this equation below. Suppose that the extended (generalized) demand function for good Y is: Qd Y= 250,000 - 500 PY - 1.5 M + 240 PX where: Qd Y = quantity demanded of good Y PY = Price of good Y M = Average

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?

Demand and Forecasting - Tobacco Company

If you were a manager in a tobacco company, analyze the elasticity of demand for tobacco products. Evaluate the factors involved in making decisions about pricing tobacco products indicating which would be the most influential.

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

Why are there differences between normal and inferior goods?

I want to know why, for example, when income rises, the consumption for black and white TVs will fall, but consumption for colour TVs rise? So simply, a couple of reasons why such differences arise? I briefly know it is related to inferior/normal goods, tastes etc? I would appreciate a variety of reasons.

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.

Price elasticity of demand for bananas

If the price elasticity of demand for bananas is -1.5 and the price elasticity of demand for grapefruit is -2.5, and the marginal cost of producing each of the items is $0.50 each, what is the profit-maximizing price for each? Question 9 answers Bananas: $1.50; Grapefruit: $0.83 Bananas: $0.75; Grapefruit: $1.25

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

Elasticity of the Demand Curve

Please help with the following questions. What can you say about the elasticity of the demand curve that faces the product (or service) produced by an organization? How much control might an organization have over pricing based on a product's elasticity? Recommend a pricing strategy to increase revenue.

Discussion of Income Elasticity of Demand

When average consumer income increases from $40,000 to $44,000 in Mapleville, the quantity demanded of widgets went from 10 to 9 units per capita, even though the price of widgets and other products did not change. What is the income elasticity of demand for widgets (using the midpoint method).

Profit Maximization Price Elasticity

Delta Airlines has determined that the price elasticity of demand for two customer segments (Coach and Business Class) is -1.35 and -2.50. Based on their expectations of profitability, Delta realizes the price of a Coach seat should be $175 (one-way). How much should Delta charge for a Business Class ticket?

Elasticity of Demand

The Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm's daily sales of these sundaes have increased from 1,500/day to 1,800/day. Compute the arc price elasticity of demand over this price and consumption quantity range. I just need assistance with the consumption

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

Optimal price

Pamela Sue, proprietor of Heartland Supermarkets would like to raise her current sales of corn from 250 bushels per week to 500 bushels per week. Her current price of a bushel of corn is $14. Given a price elasticity of demand of -2, determine a new price which will cause sales of corn to rise from 250 to 500 bushels per week.

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,