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Compute the price elasticity of demand.

Details: 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: 1.Compute the price elasticity of demand for paint and show your calculations. 2.Decide whether the demand for p

Cross Elasticity of Demand

Both SmithCo and Jones Inc. sell widgets. SmithCo's sales last month equalled 1000 and it charged a price of $2. This month Jones Inc. reduced the price it sells its brand of widgets from $2.10 to $2, and SmithCo saw a reduction in the quantity of widgets is sold, down to 900 units. What is the cross elasticity of demand between

Elasticity of Ice Cream

An ice cream store owner reads in the local paper that the elasticity of market demand for ice cream is -.38. He concluded that if he raised the price of ice cream, his total revenue would increase. So, he increased his prices by 18%, yet revenues fell substantially. Why did this outcome occur?

Analyzing given production function - Cobb Douglas Equation

Assume Firm Y's production function is given by the following Cobb Douglas equation Q = 0.5 x L^0.6 x K^0.5 where L denotes labor and K denotes capital. The production function exhibits (increasing/decreasing/constant) returns to scale. 1. If labor hours increase by 10%, what is the percentage change in output (provi

Managerial Economics

The demand function for kingston's product is given by logQ = 2.01 -0.148LogP + 0.25Log Z Q = the quantity demanded (in tons) of its product, P = the price ( in dollars per ton), and Z = the price(in dollars of a rival product a. Calculate the price elastic of demand b. Calculate the cross elasticity of demand betwe

Calculating output elasticity in the given case

A firm has carefully measured its production function, and thinks that it can be approximated by: Q = K^0.55*L^0.45, where Q = units of output, K = units of capital, and L = units of labor. a. What is output elasticity in this case? b. What sort of returns to scale does the firm face? Explain.

Price Elasticity HW Question

The demand function for gadgets is given by the following formula Q = 1,000 -10Y - 2 P + 4A where Q is quantity, Y is income, P is price, and A is advertising. Currently, Y = 20, P = 30, and A is 15 What is the point price elasticity of demand? -0.0375 -1.33 -.075 -13.33 -0.75

Calculate the price elasticity of demand.

Demand for DVD rentals at a video store is described by the equation: Q = 4,000 - 500P, where Q denotes the number of DVDs rented per week and P is the rental price in dollars. a) Determine the point price elasticity of demand at P = $3.00. b) What is the new point price elasticity if price is raised to P = $4.50? c) Co

Elasticity of Supply is exemplified.

Food stamps programs serve only to drive food prices higher, not increase the quantity of food available to the poor.� What would the elasticity of supply have to be for this statement to be true? What would the elasticity of supply have to be for a food stamp program to increase the availability of food to the poor with no

Production Economics of Widgets

A widget manufacturer sold 10,000 widgets for $2.50 each. Total fixed costs are $5,000 and variable costs per unit are $.80. (a) Given this information, what is the total profit for this production run? (b) Marketing research indicated that the price elasticity demand coefficient for the widgets is 2.5. (c) The facto

Suppose a firm has a constant marginal cost of 10$. The current price of the product is 25$, and at that price it is estimates that the price elasticity of demand is -3.0 a) Is the firm charging the optimal price for the product? Demonstrate how you know. b) Should the price be changed? if so, How?

Suppose a firm has a constant marginal cost of 10$. The current price of the product is 25$, and at that price it is estimates that the price elasticity of demand is -3.0 a) Is the firm charging the optimal price for the product? Demonstrate how you know. b) Should the price be changed? if so, How?

Calculate the own price, income and cross price elasticities of demand.

A book publisher has the following demand function for the firm's novels (Qx): Qx = 12,000-5,000Px + 5I + 500Pc where Px is the price charged for the firm's novels, I is income per Capita, and Pc is the price of books from competing publishers. Assume that the initial values of Px, I, and Pc are $5, $10,000, and $6, respecti

Price elasticity of demand

1. The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that: A. Park goers are very responsive to price changes. B. The demand for park services is elastic. C. The percentage increase in fees

Calculating price elasticity of demand

ABC company has conducted a U.S market survey for their most popular brand of contact lenses, and obtained the following information. What is the elasticity of demand? Year Population Price Average Income Eyeglass Population Number of Quantity Demanded (millions) (adjusted (adj.

Log Functions and Elasticity of Variables

The demand for haddock has been estimated as: log Q = a + b log P + c log I = d log Pm where Q = quantity of haddock sold in New England P = price per pound of haddock I = a measure of personal income in the New England region Pm = an index of the price of meat and poultry I

Price discrimination: Example problem

Many restaurants offer "early-bird specials " to dinner customers. These specials consist of a significant price reduction on selected menu items purchased before some pre-determined time, e.g., 6 p.m. Is such a practice a form of price discrimination? If so, what type?

Applications of the price elasticity of demand

1) Why do you think that whenever the government wants to increase their revenue they usually decide to increase the tax on items such as gas, tobacco products and/or alcohol? 2) Why is it unlikely that a firm would sell at a price where its demand curve happens to be price inelastic? 3) Assume the demand for cosmetic or p

Calculating price elasticity of demand

Suppose that families with children ages 6-12 years old and families with children ages 15-21 years old have the following demand for tickets to Disney World. (10 points) Quantity Demanded/Week Quantity Demanded/Week Price per Ticket (families with 6-12 year olds) (families wit

Price elasticity and discrimination

Price Elasticity Briefly describe how knowledge of price elasticity among different groups of customers or for various products enable managers to price discriminate, or change different prices for these groups.

Managerial Economics

Jim owns and manages a Dine-In Barbeque Restaurant. He has been in business for over 10 years and his restaurant has a steady patronage. Consider how each of the following scenarios impacts the market for Jim's product. You need to state whether the scenario will impact the industry demand curve or supply curve and state the

Elasticity and Short Run

1) Your boss, the mayor of a city, thought that she'd come up with a great way to raise city revenue: increase the tax on gasoline in the city! However, she discovered that the city was actually receiving less tax revenue after the gas tax increase than before. Incensed, she declared that the economic policy prescription of taxi

Cross price elasticity of demand of peanut butter and jelly

Assume the cross price elasticity of demand between peanut butter and grape jelly is negative. A. Does the cross price elasticity coefficient indicate that peanut butter and grape jelly are substitutes or complements? Why? B. Describe the effect associated with an increase in the price of peanut butter on the demand for b

Cross-Price Elasticity, Income Elasticity

A. Calculate the cross-price elasticity of demand coefficient of a firm's product X, given that a 5% increase in the price of its close substitute, product Y, causes the quantity demand of product X to increase by 10%. B.Calculate the income-elasticity of demand coefficient for a product for which a 4% increase in consumers

Integrating Problem Elasticity

Starting with the date from Problem 6 and the data on the price of a related commodity for the years 1986 to 2005 given below, we estimated the regression for the quantity demanded of a commodity (which we now relabel Q Ì?_x), on the price commodity which we now label P_x, consumer income ( which we now label Y), and the price

Price Elasticity of demand

The total operating revenues of a public transportation authority are $100 million while its total operating costs are $120 million. The price of a ride is $1, and the price elasticity of demand for public transportation has been estimated to be -0.4. By law, the public transportation authority must take steps to eliminate its o

Revenue at a Major Cell Manufacturer

Revenue at a major cellular telephone manufacturer was $1.4 billion for the nine months ending March 2, up 97 percent over revenues for the same period last year. Management attributes the increase in revenues to a 137 percent increase in shipments, despite a 17 percent drop in the average blended selling price of its line of p

Managerial Economics

A number of empirical studies of automobile demand yielded the following estimates of income and price elasticities Study Income elasticity Price elasticity Chow +3.0 -1.2 alkinson +2

Calculating Various Elasticity Values

You are the specific-area sales manager for a national company that provides, among other things, cable television service. Using monthly data for the number of subscriptions, prices, incomes, and prices of related goods for two full years (i.e., 24 months), you estimate demand for your company's high-definition television (HDTV