3. You are the only pharmacist in a small town; the next closest drugstore is 50 miles away. The population in your town consists of young farmers and older retired families. You have noticed that the young farmers are less sensitive to price changes than the retired population. Specifically, you have found that the working population has an own price elasticity of demand of-2 and the retired farmers have an own price elasticity of-4. How can you use this information to your advantage?

3. You are the only pharmacist in a small town; the next closest drugstore is 50 miles away. The population in your town consists of young farmers and older retired families. You have noticed that the young farmers are less sensitive to price changes than the retired population. Specifically, you have found that the working population has an own price elasticity of demand of-2 and the retired farmers have an own price elasticity of-4. How can you use this information to your advantage?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 6P: Explain why using the midpoint formula for calculating the elasticity of demand gives the same...

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A life-saving medicine without any close substitutes will tend to have a. a small elasticity of demand. b. a large elasticity of demand. c. a small elasticity of supply. d. a large elasticity of supply.
Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to 1.50, than in the previous December, a 4.3 percent decline. a. Use these data to estimate the price elasticity of demand for subway rides. b. According to your estimate, what happens to the Transit Authoritys revenue when the fare rises? c. Why might your estimate of the elasticity be unreliable?
Jeremy's (own) price elasticity of demand is 7.89 in absolute terms. Whenthe price rises from $4 to $13 what do you predict will be his percentagechange in quantity demanded?
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Your Best Brand Bike Shorts-BBB Shorts have been flying off the shelf. Your chiefeconomist tells you that during the Covid-19 pandemic, the taste for bicycling has shifted. Thedemand curve is much more inelastic. The price elasticity of demand has decreased from:-5.76 to -2.70.”Before the campaign your price was $240 per pair of BBB Shorts. What should bethe new price? Please show calculations.
. Why do suppliers want to create more inelastic demand relationships in the products that they sell? When the price of cellphone charges rises from $480 to $600 a month, the quantity demanded decreases from 204 million to 196 million subscribers. Calculate the price elasticity of demand for cellphone charges. Is the demand for elastic or inelastic? Would the demand for Flow charges be more elastic or less elastic than the demand for overall cellphone charges? Why? When the price of rice falls from $100 to $80, the quantity demanded of rice increases from 10 to 25, the quantity demanded of potatoes decreases from 20 to 15, and the quantity demanded of chicken increases from 18 to 35. Calculate the cross elasticity of demand for potatoes with respect to rice. Calculate the cross elasticity of demand for chicken with respect to rice. iii. Of what use are these two cross elasticities of demand to the owner of a business that sells potatoes and chicken?
If the price elasticity of demand for used carspriced between $3,000 and $5,000 is 2 1.2 (usingthe mid-point method), what will be the percentchange in quantity demanded when the price of aused car falls from $5,000 to $3,000?
3. Fred Jones a new employee at Stibo's Frozen Foods estimates that the price elasticity of demand for Stibo's Frozen Pizzas to be -1.23, as compared to a price elasticity of demand for frozen pizzas in general of -2.34. In light of the relative inelasticity of Stibo's Frozen Pizza's, Fred recommends raising the price to increase sales revenues. You, a more experienced member of the firm, are suspicious of Joe's estimate, and are skeptical of his recommended plan of action? Why? (Hint: Think about the determinants of price elasticity of demand). Reason to suspect Fred's estimate: Reason to doubt Fred's plan of action:
9 21 BBM_MI22 APF X Recordings - Onel x Calendar - Armstro X Mail - Armstrong, X Topic: Economic E X Recordings - Onel x Price Elasticity of C X + structure.com/courses/967/assignments/14531 4.2 Based on your answer in 4.1., illustrate and explain the elasticity of demand in the market for high blood pressure medication. Clearly indicate the correct percentage changes in price and quantity on the elasticity graph. (3) 4.3 Explain how Beta-Blockers can increase total revenue (TR). Question 5: [5] Read the following scenario and answer the succeeding questions. Scenario 4: Suppose the average income of a consumer named Warren decrease from R18000 to R12000. As a result, the quantity of product A demanded by Warren increase from 200 units to 280 units. For scenario 4, answer the following questions: 5.1 Use the ARC (midpoint) formula to calculate the income elasticity of demand for product A given the information above. (3) 5.2 Based on your answer in 5.1, is product A an inferior good or…
There were nearly four million fewer [subway] riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50, than in the previous December, a 4.3 percent decline.@ (New York Times, Feb. 17, 1996) Use these data to estimate the price elasticity of demand for subway rides. According to your estimate, what happens to the Transit Authority’s revenue when the fare rises? Why might your elasticity estimate be unreliable?
How do you determine which prices to use when finding the cross-price elasticity of two products?