Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. In your explanation, be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases:…
7. If the price of product L increases, the demand curve for a close substitute product M will:…
Elasticity of demand is gauged by the percentage of change in demand when the price of an item varies. If the change in the quantity demanded is greater than 1 the demand is elastic.…
B) Cross elasticity of demand measures two different products and their response to price changes. So if a consumer purchases one product cross elasticity measures how sensitive that consumer is to the change in the price of another product. It is measured by the percentage changes in demand for the first product that occurs in response to a percentage change in price of the second good. (McConnell, pg. 87)…
(a.) (15 points) Is demand elastic or inelastic in the $6-$8 price range? How do you know?…
Cross price elasticity measures the response of demand to a change in price of another substitute or complimentary good (McConnell, p. 87). Substitute goods are goods that can be purchased in place of another good. Examples of substitute goods are soda (buying Coke vs. Pepsi), computers, and potato chips. A positive cross elasticity of demand means the increase of price in one good, for example Coca-Cola, will increase the demand of a substitute good, for example Pepsi. As the price for Coke increases, consumers are more likely to purchase Pepsi at a lower price, thereby increasing its demand. Complementary goods are items that are typically purchased in…
33. Assume that the price elasticity of demand is -2 for a certain firm 's product. If the firm raises price, the firm 's managers can expect total revenue to:…
c) What will this do to the demand curve? Of the available list of things in the text that causes a change in demand, which best fits here as the cause of the demand shift?…
b. This tests your ability to distinguish between a change in demand and a change in quantity demanded. When the price of Brand X falls THERE IS NO EFFECT ON THE DEMAND for Brand X. Price of the good itself is NOT a Determinant of Demand.…
D. It shows how an increase in price leads to an increase in quantity demanded of a good.…
List and explain the three reasons Adam Smith said productivity increases with specialization. Who was Adam Smith?…
3. Price elasticity of demand would be larger / smaller for a necessity than for a luxury. Elasticity of demand would be larger / smaller in the short run than in the long run. Elasticity of demand would be larger / smaller for Cheerios than for all cereal. Elasticity of demand would be larger / smaller for table salt than for…
d How do opportunity cost, explicit cost, implicit cost, accounting profit and economic profit relate to each other? (4 marks)…
ii. A change in quantity demanded occurs when the movements along the same demand curve caused solely by changes in the price of the product itself. If there is an increase in the price of a good, the quantity demanded will fall. But if the price of a good decrease, the quantity demanded will increase.…
Another important elasticity is the cross-price elasticity of demand, which reveals the responsiveness of the demand for a good to changes in the price of a related good. This elasticity helps managers ascertain how much its demand will rise or fall due to a change in the price of another firm's product. The cross-price elasticity of demand between goods X and Y, denoted is mathematically defined as…