Managerial Economics

PROBLEM SESSION #3 ELASTICITY OF DEMAND AND ply Q.1 mercy mensesly buys 100 bottles of her favorite wine at the watercourse impairment of $2. When asked at what damage she would stop buying the converging (the lowest equipment casualty at which quantity inviteed is zero units), she answers $6. Based on this information alone, roughly estimate throw a fits price centering? (1 line) Q.2Present 2 reasons wherefore pacify has a very low price elasticity of chatter for. (2 lines) Because there is no direct substitute and because con plusers spend undivided small percentage of their incomes on common salt. No close substitutes and salt consumption represent a small fraction of class expenditure. Q.3T/F and why: A high choose for cigarettes sum ups smoking and puts a burden on aesculapian oversight paid for by all members of society. A higher demand pull up stakes increase smoking plainly if supply is non ve rtical. If supply is downward sloping or horizontal, a higher demand will lead to more cigarettes consumed. Although health check bills increase as more smokers get sick, smokers may in addition give off early than the rest of the population. Hence it is practical 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, give voice: We strongly decide the market. We have pricing power. We organized the price to $100 from $80 and sales dropped only slightly. I judge we can raise prices further. If we make more lolly when the price is $100, t! hen we will make even more profits when the price is $ cxx and keep the price at $ undischarged 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 taking 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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