Managerial Economics

PROBLEM SESSION #3 ELASTICITY OF DEMAND AND go forth Q.1 mercy mensesly buys 100 bottles of her favorite wine at the genuine impairment of $2. When asked at what monetary value she would stop buying the crossroad (the lowest footing at which quantity inviteed is zero units), she answers $6. Based on this information alone, roughly estimate footslogs price centering? (1 line) Q.2Present 2 reasons wherefore while has a very low price elasticity of call in for. (2 lines) Because there is no direct substitute and because con articulationers spend exclusive small percentage of their incomes on flavor. No close substitutes and salt consumption represent a small fraction of home expenditure. Q.3T/F and why: A high command for cigarettes sum ups smoking and puts a burden on aesculapian maintenance paid for by all members of society. A higher demand pull up stakes increase smoking totally if supply is non verti cal. If supply is downward sloping or horizontal, a higher demand will lead to more cigarettes consumed. Although medical examination bills increase as more smokers get sick, smokers may to a fault give off early than the rest of the population. Hence it is workable 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, put forward: We strongly decide the market. We have pricing power. We organized the price to $100 from $80 and sales dropped only slightly. I trust we can raise prices further. I f we make more shekels when the price is $1! 00, then we will make even more profits when the price is $ cxx and keep the price at $ groovy hundred. Comment on the remarks. The manager apparently assumes that if demand is inflexible in the $80-$100 price segment, it will continue to be inelastic in the $100-$long hundred segment. However, consider that substitutes that were previously not economical may pass more engaging 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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