Qb= 100 - 35Pb + 15Pc - 0.001I
where Pb is the price of El Cheapo beer, Pc is the price of potato chips and I measures income per capita. Currently Pb = $2.00, Pc = $1.00, and I = $10,000.
(a) Calculate the elasticity of demand for El Cheapo beer with respect to its own price, the price of potato chips, and income. Provide a one-sentence explanation for each elasticity measure.
(b) What price should the Suds-n-Spuds Brewery charge for El Cheapo beer if they are primarily interested in maximizing revenue.
(c) What happens to the price elasticity of demand for El Cheapo beer if income increases to $12,000?
Q7. The demand for widgets (QX) is given by the following equation:
QX = 425 - PX 鈥?1.5 PW 鈥?1.25 PG + 0.8 PY + 0.1 M
where QX = number of units of widgets sold per week
PX = the price of widgets = 400
PW = the price of woozles = 50
PG = the price of gadgets = 80
PY = the price of whatsits = 175
M = per capita income = 2100
(a) Calculate the elasticity of demand for widgets with respect to its own price, the price of woozles, the price of gadgets, and income.
(b) Calculate consumer surplus at the revenue-maximizing price of widgets.
(c) If the cost per widget is 200 and the widget manufacturer behaves as a monopolist, how many widgets will it sell and at what price.
Q8. The Tricities Bus Company is a regional bus line providing transit service between Coquitlam, Port Moody and Port Coquitlam. An analysis of the monthly demand for transit reveals the following demand equation:
Qx = 1,750 - 40Px - 15PC + 30BAI - 1,700S
Where Qx is quantity measured by the number of passengers per month, Px is the price, PC is a price index for connecting bus routes, BAI is a business activity index and S, a binary or dummy variable, equals 1 in summer months, zero otherwise.
Currently Px = 50, PC = 120, and BAI = 175.
(a) Calculate the quantity demanded during the winter month of January if all price-related variables are as specified above.
(b) Calculate the price elasticity of demand in winter for transit services and the cross-price elasticity of demand for transit with respect to the level of business activity.
(c) What price would you recommend the Tricities Bus company charge in the winter months if they were primarily interested in maximizing revenue?
(d) Calculate the quantity demanded during the summer month of August if all price-related variables are as specified above.
(e) Calculate the price elasticity of demand in summer for transit services and the cross-price elasticity of demand for transit with respect to the level of business activity.
(f) What price would you recommend the Tricities Bus company charge in the summer months if they were primarily interested in maximizing revenue?
Q9. The demand for the Bus 207 textbook (QX) is given by the following equation:
QX = 100 - 5.0 PX + 1.5 PY 鈥?2 PZ + 4.7 AX.
where PX = the price of the textbook, currently selling at $72.00
PZ = the price of the Study guide accompanying the text, selling at $30.00
AX = Advertising for the text, measured in units, and currently at 100
PY = the price of another managerial economics textbook, currently selling at $60.00
(a) The revenues received by an author are frequently set at 15% of the publisher鈥檚 total revenue. Use price elasticity to determine whether from the author鈥檚 point of view, the textbook been under priced or overpriced?
(b) By how much would the demand for the textbook change if advertising were increased by 2%?
(c) What is the optimal price of the textbook from the author鈥檚 point of view?
(d) If the cost per unit of good X to the publisher is $40.00 and the publisher behaves as a monopolist, how many textbooks will be sold and at what price?
(f) As the student consumer, whose interest would you like to see prevail, the author or the publisher?|||I'm glad I passed all my econ classes. No more for me!!!|||STUDY
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