# Introduction

Pages: 2 (399 words) Published: November 17, 2010
Instructions: Answer the following questions using Word format (no need to draw graphs). Submit a hard copy in class this Wednesday, 29 September. 1. Fill in the missing amounts in the following table:

| % Change in Price| % Change in Quantity| Elasticity|
Demand for Selecta ice cream| +10%| -12%| a. -.83|
Demand for beer at a pub showing the live telecast of the PBA championship game| -20%| b. +10%| -.5| Demand for tickets for John Meyer’s concert in Manila| c.+15%| -15%| -1.0|

2. Use the table above to explain your answer to the following questions: a. Let’s assume that Selecta’s goal is to increase revenues. Would you recommend that the company raise prices to achieve this goal? Why or why not? I recommend Selecta to raise their price because as we can see they already increase in their price but the change in quantity of Selecta has a negative effect. I think if they change price a little more they have a chance to increase their revenue because there elasticity is close in increasing their revenue. b. The pub would like to screen again the PBA championship game next year. Would you recommend that it cut the price of beer during this event? Why or why not? Yes I recommend them to cut their price a little lower so that the change in price will be equivalent to the change of quantity so that they will have higher revenue in the next said event. 3. using the midpoint formula, calculate elasticity for each of the following changes in demand by a household. Demand for:| P1| P2| Q1| Q2|

Long distance telephone service | P0.25 per min| P0.15 per min| 30 minutesper month| 40 minutesper month| Jollibee champ| P 80| P60| 3 per week| 6 per week|

a. Compare the elasticities. Is one good/service more elastic than the other? Why do you think this is so?

* Long distance telephone service = .58
* Jollibee Champ = 2.31
Yes a good will is always more elastic compared to service because as we can see if the...