4.1 Explain
why the choice between 1, 2, 3, 4, 5, 6, 7, and 8 “units,” or 1000,
2000, 3000, 4000, 5000, 6000, 7000, and 8000 movie tickets, makes no
difference in determining elasticity in Table 4.1. LO1 Reference Table 4.1 ...
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4.2 Graph the accompanying demand data, and then use the midpoint formula for Ed
to determine price elasticity of demand for each of the four possible
$1 price changes. What can you conclude about the relationship between
the slope of a curve and its elasticity? Explain in a nontechnical way
why demand is elastic in the northwest segment of the demand curve and
inelastic in the southeast segment. LO1...
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4.3 What
are the major determinants of price elasticity of demand? Use those
determinants and your own reasoning in judging whether demand for each
of the following products is probably elastic or inelastic: (a) bottled
water; (b) toothpaste, (c) Crest toothpaste, (d) ketchup, (e) diamond
bracelets, (t) Microsoft’s Windows operating system. LO1
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4.4 What
effect would a rule stating that university students must live in
university dormitories have on the price elasticity of demand for
dormitory space? What impact might this in turn have on room rates? LO1
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4.5
Calculate
total-revenue data from the demand schedule in question 2. Graph total
revenue below your demand curve. Generalize about the relationship
between price elasticity and total revenue. LO2 Reference
question 2 Graph the accompanying demand data, and then use the
midpoint formula for Ed to
determine price elasticity of demand for each of the four possible $1
price changes. What can you conclude about the relationship between the
slope of a curve and its elasticity? Explain in a nontechnical way why
demand is elastic in the northwest segment of the demand curve and
inelastic in the southeast segment. LO1 ...
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4.6 How
would the following changes in price affect total revenue? That is,
would total revenue increase, decrease, or remain unchanged? LO2a. Price falls and demand is inelastic.b. Price rises and demand is elastic.c. Price rises and supply is elastic.d. Price rises and supply is inelastic.e. Price rises and demand is inelastic.f. Price falls and demand is elastic.g. Price falls and demand is of unit elasticity.
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4.7 In 2006, Willem de Kooning’s abstract painting Woman III
sold for $137.5 million. Portray this sale in a demand and supply
diagram and comment on the elasticity of supply. Comedian George Carlin
once mused, “If a painting can be forged well enough to fool some
experts, why is the original so valuable?” Provide an answer. LO3
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4.8 Suppose
the cross elasticity of demand for products A and B is +3.6 and for
products C and D is −5.4. What can you conclude about how products A and
B are related? Products C and D? LO4
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4.9 The
income elasticities of demand for movies, dental services, and clothing
have been estimated to be +3.4, +1, and +.5, respectively. Interpret
these coefficients. What does it mean if an income elasticity
coefficient is negative? LO4
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4.10 Research
has found that an increase in the price of beer would reduce the amount
of marijuana consumed. Is cross elasticity of demand between the two
products positive or negative? Are these products substitutes or
complements? What might be the logic behind this relationship? LO4
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4.11 LAST WORD
What is the purpose of charging different groups of customers different
prices? Supplement the three broad examples in the Last Word with two
additional examples of your own. Hint: Think of price discounts based on
group characteristics or time of purchase.
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