Purchase Solution

Elasticity of demand and price changes

Not what you're looking for?

Ask Custom Question

Please see the attached file.

2) The initial price of a cup of coffee is $1, and at that price, 400 cups are demanded. If the price falls to $0.90, the quantity demanded will increase to 500.

a. Calculate the (arc) price elasticity of demand for coffee.
b. Based on your answer, is the demand for coffee elastic or inelastic?
c. Based on your answer to a., if the price of coffee is increased by 10%, what will happen to the revenues from coffee? Carefully explain how you know.

3) The following are the actual sales for the last six periods:
Period Sales 3MMA
1 750 -----
2 820 723
3 600 757
4 850 783
5 900 817
6 700 ------
a) Calculate the 3 month moving average (3MMA)

b) Using the 3-month moving average, what would be your prediction for period 7?

4) a- Define returns to scale.
b-Why this is considered a long run phenomenon?

Attachments
Purchase this Solution
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • A Firm's Elasticity of Demand During Last 10-15 Years

    A very high price elasticity suggests that when the price of a good goes up, consumers will buy a great deal less of it and when the price of that good goes down, consumers will buy a great deal more.

  • Brands and Price Elasticity

    Look at the formula below: % change in quantity demand / % change in price = price of elasticity PEoD > 1 then Demand is Price Elastic; the demand is sensitive to price changes. (-) PEoD = 1 then Demand is Unit Elastic. (=) PEoD

  • Supply and demand

    406357 Supply and demand: law, factors, price elasticity Explain the following Law of demand and law of supply Factors affecting demand and supply Price elasticity of demand Factors affecting price elasticity of demand Law of demand and law of supply

  • Predicting Changes in Demand

    226084 Predicting Changes in Demand Question: Suppose that the price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross price elasticity of demand between it and good Y is -6.

  • Price Elasticity Statements

    Price elasticity of supply measures the responsiveness of quantity supplied to changes in income. 1. If price rises, and total revenue falls, then demand is inelastic. <-- no, it's elastic. 2.

  • Price Elasticity and Elasticity of Demand

    In the case of used car price elasticity of demand which is 3, this means that the demand is price elastic. It is sensitive to price changes.

  • price elasticity of demand

    When the quantity demanded is unresponsive to price changes, the elasticity of demand is zero and when all firms are price takers and all quantity is sold at one price, the price elasticity of demand is infinity.

  • Price Effects and Changes in the Elasticity of Demand

    Consequently, demand is still price inelastic and a change in price should have little impact on the quantity demanded. Changes in price can affect the elasticity of demand for a good.

  • Price elasticity

    For example: Inferior goods: there is positive relationship between income and price elasticity because both changes in the quantity demanded is less effected, due to changes in price and income (Income Elasticity of demand).

  • price elasticity of demand .

    410455 Price Elasticity of Demand . Please explain the concept of " price elasticity of demand " ?

View More Related Solutions