3. The Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm’s daily sales of these sundaes have increased from 1,500/day to 1,800/day. Compute the arc price elasticity of demand over this price and consumption quantity range.

Ey = ((1800 – 1500) / ((1800 + 1500) / 2))
((1.75 – 2.25) / ((1.75 + 2.25) / 2))
Ey = 300 ($4.00)
-$0.50 (300)
Ey = -8%

4. The subway fare in your town has just been increased from a current level of 50 cents to $1.00 per ride. As a result, the transit authority notes a decline in ridership of 30 percent.

a. Compute the price elasticity of demand for subway rides.

fare price increase = 50 to 100 cents
% rise in fare (100-50/50) * 100 = 100%
decline in demand = 30%
Price elasticity = 30/100 = 0.3

b. If the transit authority reduces the fare back to 50 cents, what impact would you expect on the ridership? Why?

If the fare is reduced to 50 cents, demand for the rides increases this is because of the price of elasticity of demand.

7. In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is −1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?

There will be a decrease in total revenue for two reasons, when you look at the advertising elasticity you see that the leading coefficient is low which means the markets may not be as receptive to the product that would be needed to boost sales. The second factor is the elasticity of demands; this is directly related to the total revenues being that as the firm increases the price the result is a decrease in total revenue because of decrease in quantity of sales (services).

...Midterm Exam Part 1
• Question 1
0 out of 4 points
The level of an economic activity should be increased to the point where the ____ is zero.Answer
Selected Answer:
marginal cost
Correct Answer:
net marginal benefit
• Question 2
4 out of 4 points
The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:Answer
Selected Answer:
the coefficient of variation is a measure of...

...ECO550 Week 2 Check Your Understanding Submission
If you are using the Blackboard Mobile Learn App, plea
* Chapter 3: Problems 3, 4, and 7
Chapter 3 -Problem 3 Answer: The Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm’s daily sales of these sundaes have increased from 1,500/day to 1,800/day. Compute the arc price elasticity of demand over this price and consumption quantity range.
Arc Price...

...Question 1
3 out of 3 points
Economic profit is defined as the difference between revenue and ____.
Answer
Selected Answer:
total economic cost
Correct Answer:
total economic cost
Question 2
3 out of 3 points
The flat-screen plasma TVs are selling extremely well. The originators of this technology are earning higher profits. What theory of profit best reflects the performance of the plasma screen makers?
Answer
Selected Answer:
...

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