A 40 percent price reduction of The Times led to a 17.5 per cent increase in its sales. Price elasticity of demand for The Times: -0.44 Note: The revenue earned by The Times fell from £169,576 to £134,689! Competing papers suffered! Independent suffered most, with a 15.2 percent loss of sales, indicating a cross-price elasticity of 0.38 Cross-price elasticity for the Guardian was 0.11, and that for the Daily Telegraph was 0.05.

A 40 percent price reduction of The Times led to a 17.5 per cent increase in its sales. Price elasticity of demand for The Times: -0.44 Note: The revenue earned by The Times fell from £169,576 to £134,689! Competing papers suffered! Independent suffered most, with a 15.2 percent loss of sales, indicating a cross-price elasticity of 0.38 Cross-price elasticity for the Guardian was 0.11, and that for the Daily Telegraph was 0.05.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.3P: (Categories of Price Elasticity of Demand) For each of the following absolute values of price...

See similar textbooks

Related questions

Q: Assume that you are in an interview session and the panel asks you to give a pricing decision that…

A: In a perfect market, equilibrium would be at a point where demand equals supply.

Q: How understanding the concept of price elasticity of demand is useful for a business owner/firm…

A: Price elasticity of demand shows the responsiveness of quantity demanded due to the change in the…

Q: Own price elasticity of demand for vibranium has been estimated at 0.8. As a result a mining…

A: Price elasticity of demand: - Price elasticity of demand measures the responsiveness of change in…

Q: Apple normally sells 300 million ipods @ $150 each. Its variable cost is $35 each. The price…

A: As the question has multiple questions, we would be answering the first one only. Please resubmit…

Q: P12.4 Optimal Markup on Cost. The Bristol, Inc., is an elegant dining establishment that features…

A: Given information: Initial price (P) = $16 Final price (P1) = 16-4 = $12 Initial quantity (Q) = 250…

Q: • RCO Manufacturing is an electronics manufacturer and retailer. Its main products are Computers,…

A: The ED {elasticity of demand} of P {price} can be described as measuring the {change} in the (Q)…

Q: You make a lightweight compact foldable windbreaker. Your brand, Desert Wind Jackets, is well…

A: Formula to be used: Lerner Index = - 1 E = (P - MC)P where, E stands for demand elasticity.

Q: PNG’s managers estimate that a 50% increase in price would cause an 80% reduction in the quantity of…

A: Introduction PNG’s managers estimate that a 50% increase in price would cause an 80% reduction in…

Q: 1. The demand curve for a product is given by Qx= 1,200 – 3Px – 0.1Pz Where Pz SR300. What is the…

A: Own price elasticity measures the responsiveness of quantity demanded to change in the price of the…

Q: Worldwide annual sales of smartphones over a two year period were approximately q = -5p + 3,030…

A: The price elasticity of demand measure the responsiveness of change in the quantity demand when the…

Q: True or False: Elasticity is measured as the unit change in quantity divided by the dollar change…

A: Elasticity: - Elasticity measures the responsiveness of change in one variable due to a change in…

Q: QUESTION 37 A price elasticity coefficient of 4 for Exxon gasoline indicates: OA 10 percent increase…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: 10 20 30 have been hired as an economic consultant by TELECOM and given the following demand…

A: Elasticity of demand measures the responsiveness of demand to change in the price level of…

Q: A premier League football club estimate that whilst the price elasticity of demand for its first…

A: The measure of price elasticity of demand is used to determine by what percentage the quantity…

Q: The following data for gasoline sales and prices at a Slurpico Station in West Valley, Washington…

A: "Since you have posted a question with multiple subparts, we will solve the first three subparts for…

Q: The prices and elasticities for some different types of food are summarised in Table 1. Table 1:…

A: Price elasticity is one of the widely used economic measure to analyze the market demand for a…

Q: A firm manufactures high priced gold plated wrist watches. The firm is considering lowering the…

A: The concept of price elasticity in demand tells us how much a person will change his/her demand for…

Q: Assume that the quarterly demand for an SUV produced by an automobile company is Qd = 150,000 –…

A: Answer: Given, demand function: Qd=150,000-1.5P (A). When the revenue is maximum the demand is unit…

Q: The price of Kenwood blender increased from ȼ150 to ȼ250. Following the increase in price, quantity…

A: Given, Initial price (P2)= ȼ150 New price (P1)= ȼ250 Initial quantity demanded (Qd1)= 500 New…

Q: Globalization’s fast pace around the world has helped people to adopt new trends and fashion at a…

A: Given : QC=10,000-20PC Demand curve for the above is given below.

Q: You are the manager of a firm that receives revenues of $60,000 per year from product X and $80,000…

A: please find the answer below.

Q: 13. For each of the following equations, Determine whether demand is elastic, inelastic or unitary…

A: NOTE: Since you have asked multiple questions we will be answering only the first one, if you need…

Q: At a price of $35, Davidson Cycles rented 22 bicycles. When it increased its rental price to $45, 18…

A: Price elasticity refers to the responsiveness of quantity demanded to change in the price level of…

Q: The demand curve for a product is given Qd x = 1500 − 5Px − 0.2Pz by where Pz = $300. a. What is…

A: Answer: Given: The demand function for good x: Qdx=1500-5Px-0.2PzWhere Px is the price of good x and…

Q: An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase…

A: The price elasticity of supply measures the percentage change in the quantity supplied of a good or…

Q: The demand curve for a product is given by QXd = 1,200 - 3PX - 0.1PZ where Pz = $300.a. What is the…

A: The price elasticity of demand is a measurement of how a product's consumption changes in response…

Q: The short-run elasticity of demand for chicken breasts measured by the National Chicken Council to…

A: Solution: a) Calculation of expected decrease in sales unit: % change in price is 10%. Short-run…

Q: AJM distributors has hired you to provide financial advice on a product being sold. They have…

Q: a Slurpico Department of Energy. Prices are in dollars and sales are in gallons per day and driven…

A: Since you have posted a question with multiple subparts, we will solve the first three sub-parts for…

Q: D2

A: A good price elasticity of demand is a measure of how sensitive the quantity demanded for a product…

Q: Worldwide annual sales of smartphones over a two year period were approximately q=-4p+3020 million…

A: Demand Refers to the quantity that a consumer wishes to purchase at a given price in a given period…

Q: The demand curve for a product x is given by Qdx 1,000 2Px + 0.02PZ, %3D where Pz = $400. a) What is…

A: Elasticity is defined as the ratio of percentage(%) change in quantity(Q) to the percentage(%)…

Q: Budweiser and Heineken: % change in demand for Budweiser = 40% % change in price of Heineken = 10%…

A: In the given scenario, there is a 40% change in the demand for Budweiser and there is a 10% change…

Q: Discuss how the concepts of price elasticity of demand and production costs help firms set their…

A: The price elasticity of demand is the degree of responsiveness from the part of the consumer’s…

Q: Qd= 25000-2p Qs= 10000-1p Calculate the market equlibrium level of price and quantity for housing…

A: An equilibrium is that state of balance where there is no tendency to move further. Given…

Q: = 2000 30P. The commodity is initially The demand function for a commodity is given by Q priced at…

A: Given: Q=2000-30P Price=20 per unit To find: Price elasticity of demand Note: Due to multiple…

Q: Explain the demand, income, cross-price and supply elasticity for five (5) types of building…

A: In general, the concept of normal construction can be described as the procedure of making the…

Q: Question 14 Ed makes custom rugs and sells them in his online store. Recently, he raised his…

A: Increase in price=10% Option A: Increase in price will increase revenue. Correct. When the…

Q: Worldwide annual sales of smartphones over a two year period were approximately q = -5p + 3,040…

A: The price elasticity of demand shows the responsiveness of change in the quantity demand when the…

Q: Description of the event of fresh milk in a company: Elasticity and Its Application - Determine…

A: The measure that depicts the change in quantity being demanded of a good with respect to the change…

Question

Consequence

A 40 percent price reduction of The Times led to a 17.5 per

cent increase in its sales.

Price elasticity of demand for The Times: -0.44

Note: The revenue earned by The Times fell from

£169,576 to £134,689!

Competing papers suffered!

Independent suffered most, with a 15.2 percent loss of sales,

indicating a cross-price elasticity of 0.38

Cross-price elasticity for the Guardian was 0.11, and that for

the Daily Telegraph was 0.05.

Implications?

What do you expect would happen to the sales of The Financial

Times?

Why did The Times adopt a strategy of price cut?

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Part 1

Part 2

Part 3

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Question 1 The Potomac Range Corp manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac's closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomac's oven and the competitive Spring City model? Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is -3.0, what price would Potomac have to charge to sell the same number of unit it did before the Spring City price cut?
The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers’ disposable personal income. The following data pertaining to Reliable’s aircraft sales, selling prices, and consumers’ personal income were collected:a. Estimate the arc price elasticity of demand using the 2006 and 2007 data.b. Estimate the arc income elasticity of demand using the 2007 and 2008 data.c. Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by $40 billion. Also assume that arc income elasticity computed in (b) above is the best available estimate of income elasticity.d. Forecast 2009 sales for Reliable given that its aircraft prices will increase by $500 from 2008 levels and that…
Problem 07-03 (algo) Suppose the own price elasticity of market demand for retail gasoline is -0.6, the Rothschild index is 0.4, and a typical gasoline retailer enjoys sales of $1,800,000 annually. What is the price elasticity of demand for a representative gasoline retailer's product? Instruction: Enter your response rounded to two decimal places. If entering a negative number, be sure to use the negative (-) sign.
Problem 03-06 (algo) You are the manager of a firm that receives revenues of $40,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between product Yand X is -1.8. How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 1 percent? Instructions: Enter your response rounded to the nearest dollar. If you are entering a negative number, be sure to use a (-) sign. GA
Description of the event of fresh milk in a company: Elasticity and Its Application - Determine elasticity (may not have data but can be argued qualitatively)
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac’s closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a. What is the arc cross elasticity of demand between Potomac’s oven and the competitive Spring City model? b. Would you say that these two firms are very close competitors? What other factors could have influenced the observed relationship? c. If Potomac knows that the arc price elasticity of demand for its ovens is −3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected: Year Aircraft Sales 2006 2007 2008 0 0.22 -0.38 -0.22 The arc price elasticity of demand between 2006 and 2007 is: -8.11 -3.53 525 3.53 450 0 400 The arc income elasticity of demand between 2007 and 2008 is: Average Price (Dollars) 16,800 8,000 8,000 Disposable Constant Income (In constant 2006 dollars, billions) 610 610 Aircraft Sales 2009 Forecast: Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income…
FACT: Sonic @ Co. produces sonic boom chocolates, demand for which is: D(p) 50(p+2) 2), [1] Write down the equation of the total revenue function for this firm in terms of price. [2] Derive the own price elasticity of demand. [3] Suppose, Sonic @ Co. is planning to charge $8 for each chocolate. Calculate the absolute value of the own price elasticity of demand at this price. [4] If you were hired as a consultant for Sonic @ Co., would you advise them to charge $8 for each chocolate at equilibrium? Clearly write YES/NO, and briefly justify your answer with required calculation. [5] To complete your answer to this question, enter only the absolute value of the own price elasticity of demand you calculated (in step [3] above) and enter the value in this blank here.
Price Quantity Demanded Price Elasticity of Demand Total Revenue Degree of Elasticity, i.e., elastic, inelastic etc. Table above shows a straight-line demand curve that confronts a toy company. $6 1 (a) In column 3, compute the coefficient for the price elasticity of demand at each price using the midpoints formula and In column 4, calculate total revent (b) Describe the character of elasticity in column 5, across the prices based on the total revenue test and the elasticity coefficient. (c) Does a straight-line demand curve have constant elasticity? Explain. (d) Of what practical significance is your answer to (c)? 4 4 21 ALT+F10 (PC) or ALT+FN+F10 (Mac).
Question 2 The weekly demand function for bubble tea at Bobo Tea Malaysia is: P = 200- 4Q where Q is the number of cups per week and P is the price per cup of bubble tea. Bobo Tea is considering decrease its price below the current price of $20. But the company is unwilling to decrease its price if the price fall will cause revenue to fall. (a) Calculate its price elasticity of demand for bubble tea at the current price of $20 per cup. (b) Based on your answer in part (a), should Bobo Tea decrease its price below $20 per cup? Explain with economic reasoning.
Question No 4: Calculate the Elasticity of Demand by using Midpoint Formula and find the total revenue and Total Revenue Test Elastic, Inelastic or Unit elastic Price (P) Quantity Elasticity Total Revenue Total Revenue Test Demanded (Q) Coefficient of TR(PxQ) Elastic, Inelastic or Demand (Ed) Unit elastic 1 2 5 3 5 6 1 3.
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over their past year. Recently, its closest competitor, Decayfighter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopdecay’s sales declined by 1,500 units per month. a) What is the arc cross elasticity of demand between Stopdecay’s toothbrush and Decayfighter’s toothbrush? What does this indicate about the relationship between the two products?