ELASTICITY OF DEMAND In Exercises 23 through 28, compute the elasticity of demand for the given demand function D(p) and determine whether the demand is elastic, inelastic, or of unit elasticity at the indicated price p. 23. D(p) = -1.3p + 10; p =4 24. D(p) = -1.5p +25; p = 12 25. D(p) 200 - p²; p = 10 =
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- Exercise : Following an increase in it's price, from 10$ to 12$, the demand for a good falls from 10500 to8100 units.What elasticity of demand would you estimate from these data? Calculate its value, first by using the general formula (for discrete changes), then by assuming a constantconstant elasticity of demand (log formula).Calculate the demand for p=9 (note q9 the quantity for p=9), using the general formula then in log of the elasticity calculated in Now, Knowing the value of the direct price elasticity of demand calculated previously, assuming constant costs andcosts and rivals not responding to your price cut, would you have recommended the price cut from 10 to 9?price cut from 10 to 9 ?Exercise IV: Revenue functions Assume that the demand of chocolate of a local producer is given by q = 9 - √p in hundreds of kilograms, where p = [0, 81] is the price of a kilogram in USD. 1. Compute the elasticity of the demand as a function of p, and find where it is unit elastic, elastic, and inelastic. 2. Compute the revenue R(p) in USD as a function of p. Careful of units! 3. Compute R'(25). Interpret this quantity. Remember to write down units. 4. What is the sign of R'(25)? Considering what you obtained in Question 1, does this make sense? Why? 5. Now, compute the revenue R(q) in USD as a function of q. Careful of units! 6. Compute the marginal revenue Rm(q). 7. Compute Rm (4). Interpret this quantity. Remember to write down units. Since q= 4 corresponds to p= 25, why is the result different from Question 3?Suppose that when income decreases by 4%, the quantity of margarine demanded rises by 1%. Knowingthis, the income elasticity (EI) for margarine is(A) EI = .25(B) EI = -1/4(C) EI = -4(D) EI = -3
- P & A Ch 05 Q10 Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 10%, it should increase the price by ? %. If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be ( larger / smaller ) than the effect 3 months from now. Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. Adults are more likely to be addicted to cigarettes. Teenagers do not have as much income as adults, so they are more price sensitive. It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes.Danny "Dimes" Donahue is a neighborhood's 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $2.25 each, he sells 250. At a price of $1.75 each, he sells 300. Instructions: Use the midpoint method and round your answer to two dcimal places. Do not include a negative sign (-). a. What is the elasticity of demand? 4 b. Is demand elastic or inelastic over this price range? Inelastic Elastic c. If demand had the same elasticity for a price decline from $1.75 to $1.25 as it does for the decline from $2.25 to $1.75, would cutting the price from $1.75 to $1.25 increase or decrease Danny's total revenue? OIncrease O DecreaseGiven the demand function D(p) Find the Elasticity of Demand at a price of $5 = 200 - 3p², At this price, we would say the demand is: Unitary Inelastic Elastic Based on this, to increase revenue we should: Raise Prices O Keep Prices Unchanged O Lower Prices
- Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 10%, it should increase the price by . If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be than the effect 3 months from now. Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. Teenagers do not have as much income as adults, so they are more price sensitive. It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes. Adults are more likely to be addicted to cigarettes.Given the demand function D(p) = Unitary Elastic O Inelastic 250 р Find the Elasticity of Demand at a price of $70 2 At this price, we would say the demand is: Raise Prices O Lower Prices O Keep Prices Unchanged Based on this, to increase revenue we should:Suppose the demand for selling a Nintendo Switch console at a price p is modeled by the function ri8, D(p) = V450 -p for 0The demand function for a certain item is Q= p represents the price of an item and Q represents the number of items sold at that price. (a) Evaluate the demand elasticity E when p = 8. E(8)= -0.625 (b) For what value of p is the demand elasticity unitary? p=|| Here, "demand elasticity" is the absolute value of = 200(80 - p²). percent change in quantity percent change in price for an infinitesimal change in price, so E = AQIQ lim Ap-0 AplpSuppose that the price of whiskey increases from R100 to R150 a bottle and as a result the quantity demanded decreases from 1 100 bottles to 800 bottles. 5.1.1. Use the ARC (midpoint) formula to calculate the price elasticity of demand forwhiskey. (3) 5.1.2. Based on the calculated elasticity value in 5.1.1, indicate whether the demand in themarket for whiskey is elastic or inelastic. (1) 5.1.3. Based on your answer in 5.1.2, illustrate the elasticity of demand in the market forwhiskey. Clearly indicate the correct percentage changes in price and quantity on theelasticity graph. (4)Use the price-demand equation below to determine whether demand is elastic, is inelastic, or has unit elasticity at the indicated values of p. x = f(p) = 110-4p-0.1p² (A) p = 5 (B) p = 10 Unit Elastic Elastic Inelastic (C) p = 15 C... (A) Describe the demand's elasticity for the given price-demand equation at p=5. Choose the correct answer below.SEE MORE QUESTIONS