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point price elasticity of demand

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16) If demand increases while supply decreases for a particular good:
a. its equilibrium price will increase while the quantity of the good produced and sold could increase, decrease, or remain constant.
b. the quantity of the good produced and sold will decrease while its equilibrium price could increase, decrease, or remain constant.
c. the quantity of the good produced and sold will increase while its equilibrium price could increase, decrease or remain constant.
d. its equilibrium price will decrease while the quantity of the good produced and sold could increase, decrease, or remain constant.

17) The quantity of product X supplied can be expected to rise with a fall in:
a. prices of competing products.
b. price of X.
c. energy-saving technical change.
d. input prices.

19) If the production of two goods is complementary a decrease in the price of one will:
a. increase supply of the other.
b. increase the quantity supplied of the other.
c. decrease the price of the other.
d. decrease supply of the other.

25)Demand Analysis. The Crank Yankers DVD (season two) has been a hot seller during recent weeks. An analysis of weekly demand shows:

Q = 3,000 - 90P

where Q is DVD sales and P is price.

A. How many DVDs could be sold at a $20 price?

B. Calculate the point price elasticity of demand at a price of $20.

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Solution Preview

16) If demand increases while supply decreases for a particular good:
a. its equilibrium price will increase while the quantity of the good produced and sold could increase, decrease, or remain

constant.
b. the quantity of the good produced and sold will decrease while its equilibrium price could increase, decrease, or remain

constant.
c. the quantity of the good produced and sold will increase while its equilibrium price could increase, decrease or remain

constant.
d. its equilibrium price will decrease while the quantity of the good ...

Solution Summary

This job finds the point price elasticity of demand and other factors.

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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 pound. Initially the price of steel is $1 per pound, income per capita is $20,000, and the price of aluminum is $0.80 per pound.

A. How much steel will be demanded at the initial prices and income level?
B. Based on the equation, what is the relationship between steel and aluminum? Explain briefly how you know.
C. What are the point price, income, and cross elasticities at the present values? Interpret your answers, saying how much a 1% change in each variable impacts demand.
D. If the objective is to increase total revenue, should the price be increased or decreased? What if the objective is to increase total profit? Explain.

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