a) What other elasticities of demand are there besides price, income, and cross price? (1mk) (b)...

a) What other elasticities of demand are there besides price, income, and cross price? (1mk)
(b) What is the usefulness to the firm of the elasticity of demand over which the firm has control? (2.5 marks)
(C) Why is it essential for the firm to use the elasticity of all the variables included in the demand function? (2.5 marks)

Expert Solution

a)

Elasticity of Supply and Advertising Elasticity are the examples of elasticites other than price, income and cross-price. Advertising elasticity is also known as Promotional Elasticity

b)

Elasticity plays a crucial role for the firm in terms of taking future price actions. For example, if the firm has elastic demand, and there is sudden increase in the quantity demanded, then it is suggested that the firm should decrease its price in order to higher revenue.

Similarly, if the firm faces inelastic demand, then fall in the quantity demand would call for increase in the price of the products.

c)

The factors which are involved in the demand function influence the price of the product in the market. It is crucial each and every variable and their impact on the price level. In order to understand a variable, we study its elasticity or the degree of responsiveness towards the price change.

If we study only few variables and ignore others then the Total Revenue would be impacted. The quantity has to be changed as per the individual variable elasticity. That is why it is important for the firm to use the elasticity of all the variables included in the demand function

**if you liked the answer, then please upvote. Would be motivating for me. Thanks.

Rahul Sunny answered 7 months ago

The table below provides information regarding price elasticities, income elasticities and cross-price elasticities of demand. Answer...

The table below provides information regarding price elasticities, income elasticities and cross-price elasticities of demand. Answer the following questions by using the information from this table. Commodity Price Elasticity Income Elasticity Price change in this commodity Cross-price Elasticity Electricity (at home) 0.15 0.25 Natural Gas 0.35 Restaurant Meals 1.9 2.5 ---- ---- Coffee 0.25 ----- Milk -0.15 Bread 0.20 -0.10 ---- ---- a. Which commodities are normal and which are inferior? b. Which commodities are complements and which are substitutes?...

A. price and income elasticities of demand; B. empirical evidence from Newly Industrialised Countries of South...

A. price and income elasticities of demand; B. empirical evidence from Newly Industrialised Countries of South East Asia; C. protectionism and its consequences; D. an argument on free trade vs protectionism.

Explain the differences among price elasticity, mid-point elasticity; Income and Cross Price elasticities.

Please discuss briefly income and cross elasticities of demand with examples related to business world.

The accompanying table lists the cross-price elasticities of demand for several goods, where the percent quantity...

The accompanying table lists the cross-price elasticities of demand for several goods, where the percent quantity change is measured for the first good of the pair, and the percent price change is measured for the second good. Good Cross-price elasticities of demand Apple and orange +0.95 Shirt and trousers -2.55 Explain the sign of each of the cross-price elasticities. What does it imply about the relationship between the two goods in question? b. Which of the following...

Determine the price elasticity of demand, the cross-price elasticity of demand or the income elasticity in...

Determine the price elasticity of demand, the cross-price elasticity of demand or the income elasticity in the following scenarios a. Consider the market for coffee. Suppose the price rises from $4 to $6 and quantity demanded falls from 120 to 80. What is price elasticity of demand? Is coffee elastic or inelastic? b. John’s income rises from $20,000 to $22,000 and the quantity of hamburger he buys each week falls from 2 pounds to 1 pound. What his income elasticity? Is hamburger...

Explain the concepts of cross-price elasticity of demand and income elasticity of demand. (10 points) What...

Explain the concepts of cross-price elasticity of demand and income elasticity of demand. (10 points) What do positive and negative values indicate for each of these demand elasticities?

A-) An explanation of structuralism B-) Prebisch - Singer hypothesis C-) Price and income elasticities of...

A-) An explanation of structuralism B-) Prebisch - Singer hypothesis C-) Price and income elasticities of demand D-) empirical evidence from newly Industrialised countries of south east asia E-) Protectionism and its consequenses F-) An argument on free trade vs protectionism

Examine the table below showing the price elasticities of demand for tobacco products. Households by Income...

Examine the table below showing the price elasticities of demand for tobacco products. Households by Income Group Elasticity of Smoking Participation Conditional Demand Elasticity Total Price Elasticity of Demand The Poorest -0.51 -0.60 -1.10 Poor -0.41 -0.58 -0.99 Middle Income -0.39 -0.46 -0.85 Upper Middle -0.41 -0.36 -0.77 Rich -0.45 -0.37 -0.82 Total -0.40 -0.47 -0.87 Source: Onder and Yureki, 2006 Let’s first understand how to use the table by looking at the price elasticity of demand overall for tobacco...

Compare the price elasticities of demand at every price for the two demand curves: x1 =...

Compare the price elasticities of demand at every price for the two demand curves: x1 = 450 - p1 and x1 = 150 - 1/3 p1. Explain your answer using a graph.

Question