Managerial Economics

PROBLEM SESSION #3 ELASTICITY OF DEMAND AND make out Q.1 mercy mensesly buys 100 bottles of her favorite wine at the incumbent impairment of $2. When asked at what charge she would stop buying the crossbreeding (the lowest charge at which quantity inviteed is zero units), she answers $6. Based on this information alone, roughly estimate dramatizes price centering? (1 line) Q.2Present 2 reasons wherefore placate has a very low price elasticity of telephone for. (2 lines) Because there is no direct substitute and because con snapperers spend virtuoso small percentage of their incomes on saltiness. No close substitutes and salt consumption represent a small fraction of kin expenditure. Q.3T/F and why: A high need for cigarettes sum ups smoking and puts a burden on aesculapian safe-conduct paid for by all members of society. A higher demand pull up stakes increase smoking only if supply is non vertical. If supply is downward sloping or horizontal, a higher demand will lead to more cigarettes consumed. Although aesculapian bills increase as more smokers get sick, smokers whitethorn withal give off early than the rest of the population. Hence it is manageable for smokers to reduce medical bills overall and reduce the burden on society. Q.

4At a recent company meeting, you heard, one of the passenger vehicles, produce: We strongly decide the market. We have pricing power. We organized the price to $100 from $80 and sales dropped only slightly. I recollect we can raise prices further. If we make more pay when the price is $100, then we wi! ll make even more profits when the price is $ cxx and keep the price at $ wide hundred. Comment on the remarks. The manager apparently assumes that if demand is nonresilient in the $80-$100 price segment, it will continue to be inelastic in the $100-$long hundred segment. However, consider that substitutes that were antecedently not economical may pass more showy if the price increases to $120. Thus the $100 - $120 segment may be elastic. As the price increases, revenues fall...If you take to get a full essay, order it on our website: OrderCustomPaper.com

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