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# Elasticity

### 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,

### 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

### Elasticity of Cheese Use at Fast Food Chains

Yum! Brands operates Pizza Hut and Taco Bell among other brands of restaurants. Mozzarella cheese is an ingredient at both restaurant chains. At which chain do you think is the demand for mozzarella more elastic? Why?

### 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

### Calculate by how much the demand for cigarettes will change (a) in the short run, and (b) in the long run.

Suppose that the price elasticity of demand for cigarettes is 0.46 in the short run and 1.89 in the long run, the income elasticity of demand for cigarettes is 0.50, and the cross-price elasticity of demand between cigarettes and alcohol is -0.70. Suppose also that the price of cigarettes, the income of consumers, and the price

### Elasticity of Demand and Supply

Six (6) questions on Elasticity of Demand and Supply

### 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

### Elasticity Analysis

Address the following for the town of Rostin. Price: \$1 Sales per day: 100 popsicles Short run price increase of \$1 (to \$2 total) = Es = 1.0 (unit-elastic) Long rum price increase of \$1 (to \$2 total) = Es = 1.5 How many popsicles will be sold at the new price in the short term and long term? Apply the midpoints approac

### Effects on Price Elasticity of Demand for Corporate-Owned Jets

What effect, if any, does each of the following events have on the price elasticity of demand for corporate-owned jets? a. Reduced corporate earnings lead to cuts in travel budgets and increase the share of expenditures on corporate jet travel. b. Further deregulation of the commercial airlines industry substantially incre

### Microeconomics review questions 1. Elasticity of supply for popsicles 2. Consumer and producer surplus 3. Marginal utility per dollar

1. 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,

### 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

### elasticity of demand on paint

Suppose you are a painter, and the price of a gallon of paint increases from \$3.00 a gallon to \$3.50 a gallon. Your usage of paint drops from 35 gallons a month to 20 gallons a month. Perform the following: Compute the price elasticity of demand for paint and show your calculations. Decide whether the demand for paint is elast

### Calculating the price elasticity of demand

The demand schedule for the product produced by a monopolist is given in the following table. Quantity demanded Price Total revenue Marginal revenue Price elasticity 0 \$1000 1 600 2 500 3

### 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

### Price elasticity of demand steps

You have recently received a report indicating that the Price elasticity of demand for flat screen LG TV's is -1.6. 1. Explain the steps involved in pricing the television units in order to maximize total revenue. Use diagrams to explain your answer.

### 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

### Elasticity of Supply & Demand

Pricing Commonly Owned Complementary Products: You are a hospital administrator trying to raise capital to refurbish the hospital. Your local bank is reluctant to lend to you because you already have a large mortgage on the property on which the hospital complex lies. But your bankers tells you that they can lend you more if

### Elasticity of Demand

Having a hard time determining which is inelastic and elastic, Need Help determining which is elastic and inelastic in the attached question and also how to arrive at the answer for this question: Suppose that the Tennessee Titans' owner, Bud Adams, is considering a plan in which fans who donate blood get a \$20 reduction in t

### Calculating New Price Level

Company had 10,000 shoes sales (\$100 a pair) per month, a major competitor cut their price and the company sales declined to 8000 shoes per month, If the company wishes to restore sales to 10,000 per month determine the price they need to charge. Company A estimates that the price elasticity is -2.0 in the price quantity range.

### Exchange Rates and Elasticity

Suppose that Americans decide to increase their saving. a.If the elasticity of U.S. net capital outflow with respect to the real interest rate is very high, will this increase in private saving have a large or small effect on U.S. domestic investment? b.If the elasticity of U.S. exports with respect to the real exchange ra

### Income Elasticity of Demand using Demand Function

"Suppose the demand function is Q=20-4*Price+10*Income, what is the income elasticity if Income=400 and Q=20?" Answer A. There is not enough information to answer this question B. 200 C.1000

### Calculating price elasticity of demand with the midpoint formula

See the attached file. Using the midpoint formula, calculate elasticity for each of the given changes in demand by a household. P1 P2 Q1 Q2 Demand for: a. Long-distance telephone service \$0.25/min \$0.15/min 300min/month 400min/mth b. Orange jui

### Managerial Economics

Fill in the missing amounts in the following table % CHANGE IN PRICE % CHANGE IN QUANTITY ELASTICITY Demand for Ben and Jerry's Ice Cream +10% -12% a. Demand for Beer at San Francisco

### Calculate the profit-maximizing quantities and prices for a firm that can practice third-degree price discrimination. Use the result to prove the general relationship between pricing policy and price elasticity of demand.

A. Explain what is meant by "third-degree" price discrimination. What conditions would have to hold for a firm to be able to engage in third-degree price discrimination? If these conditions hold, what general rule would a firm follow to maximize profits? How would its pricing policy be related to the elasticity of demand?