7. In each case below, determine the effect on the sellers' total revenue and identify whether...

7. In each case below, determine the effect on the sellers' total revenue and identify whether the demand curve in this particular market is elastic, inelastic, or unit-elastic in the relevant price range.

a. When the price per package of a brand of chocolate chip cookies increases from $4 to $5, monthly quantity demanded decreases from 20 000 to 15 000.

b. A fall in the price of sugar from $4 to $3 per carton raises weekly quantity demanded from 20 000 to 25 000 cartons

c. A rise in the quantity demanded of a monthly fashion magazine from 35 000 to 40 000 copies occurs when its newsstand price is reduced from $10 to $9.

d. Daily quantity demanded of a particular model of digital music player rises from 5000 to 6000 players if its price drops from $60 to $50

Expert Solution

Answer. Total Revenue is equal to Price*Quantity. So total revenue at old prices with old quantities and new prices with new quantities will be compared. Price elasticity is equal to percentage change in quantity demanded divided by percentage change in price of the good. Mathematically it can be written as, elasticity = [(Q₁ - Q₀)*P₀]/[(P₁ - P₀)*P₀].

(a) Old total revenue = 4*20000 = 80000. New total revenue = 5*15000 = 75000.

Elasticity = (15000-20000)*4 divided by 20000*(5-4) = -20000/20000 = -1. Thus it is unit elastic.

(b) Old total revenue = 4*20000 = 80000. New total revenue = 3*25000 = 75000.

Elasticity = (25000-20000)*4 divided by 20000*(3-4) = 20000/-20000 = -1. Thus it is unit elastic.

(c) Old total revenue = 10*35000 = 350000. New total revenue = 9*40000 = 360000.

Elasticity = (40000-35000)*10 divided by 35000*(9-10) = 50000/-35000 = 1.43. This is price-elastic as it is more than one.

(d) Old total revenue = 60*5000 = 300000. New total revenue = 50*6000 = 300000.

Elasticity = (6000-5000)*60 divided by 5000*(50-60) = 60000/-50000 = 1.2. This is price elastic as it is more than one.

Rahul Sunny answered 9 months ago

For each of the following, identify whether total revenue rises, falls, or remains constant:

For each of the following, identify whether total revenue rises, falls, or remains constant: (a) Demand is inelastic and price falls. (b) Demand is elastic and price rises (c) Demand is unit elastic and price rises (d) Demand is inelastic and price rises (e) Demand is elastic and price falls.

In each case below, identify the effect on the demand for ice cream. a. An increase...

In each case below, identify the effect on the demand for ice cream. a. An increase in the price of sorbet (substitute) b. An increase in the price of ice cream cones (complement) c. A decrease in consumer income d. A decrease in advertising by the producers of ice cream e. A decrease in population

Determine the effect of the following errors on a company's total revenue, total expenses, and net...

Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected. Transactions Total Revenue Total Expenses Net Income Example: A check for $325 was written to pay on account. The accountant debited Rent Expense for $325 and credited Cash for $325. Not Affected Overstated Understated a. $615 was received on account from customers. The accountant debited Cash for $615 and credited...

In each of the following cases identify whether the change is an income effect, a substitution...

In each of the following cases identify whether the change is an income effect, a substitution effect, or both. Explain briefly, and draw a graph depicting the change, making sure to label axes and lines. 1) Heather has received a bonus of $500 in her job. 2) Hala is choosing consumption and savings from her current income. The interest rate on her savings increased from 5% to 10%. 3) Henry spends all his income on electronics and food. The price...

For each of the questions below, a histogram is described. Indicate in each case whether, in...

For each of the questions below, a histogram is described. Indicate in each case whether, in view of the Central Limit Theorem, you can be confident that the histogram would look like approximately a bell-shaped (normal) curve, and give a brief explanation why (one sentence is probably sufficient). There are no data for these questions, so you will not need to use the computer to answer these questions. A police department records the number of 911 calls made each day...

For each of the questions below, a histogram is described. Indicate in each case whether, in...

For each of the questions below, a histogram is described. Indicate in each case whether, in view of the Central Limit Theorem, you can be confident that the histogram would look like approximately a bell-shaped (normal) curve, and give a brief explanation why (one sentence is probably sufficient). 1. The price of one gallon of gasoline at a particular gas station is recorded every day of the year, and the 365 values are plotted in a histogram. 2. Two hundred...

Direction: For each of the ff sentences, determine whether that cause and effect relationship is valid...

Direction: For each of the ff sentences, determine whether that cause and effect relationship is valid or simply a case of correlation: As ice cream sales go up, the rate of drowning deaths increases. Lorena spent five minutes studying for her final exam, and she failed it. As the number of pirrates attacks off the coast of Somalia has increased, the earth’s temperature has been warming. Miguel ignored the dead and rotting tree in his backyard because he didn’t want...

For each of the 7 groups of chemical agents, identify the mechanism of action and determine...

For each of the 7 groups of chemical agents, identify the mechanism of action and determine if the agent is capable of sterilizing or only disinfecting.

Determine for each statement below by listing true or false, on whether or not it is...

Determine for each statement below by listing true or false, on whether or not it is a true difference between RNA polymerase and DNA polymerase: 1) RNA pol doesn’t require a primer, DNA pol does. 2) RNA pol doesn’t have proofreading, DNA pol does. 3)RNA pol reads template 3’-->5’, DNA pol reads template 5’-->3’. 4)RNA pol adds nucleotides 3’-->5’, DNA pol adds nucleotides 5’-->3’. 5)RNA pol creates RNA, DNA pol creates DNA. 6)RNA pol template is RNA, DNA pol template...

Determine whether each of the statements below is true or false, and place it in the...

Determine whether each of the statements below is true or false, and place it in the appropriate bin. Which statements below are True and which are False: 1. It is possible to move at constant speed without moving at constant velocity 2. It is possible to move at constant velocity without moving at constant speed 3. If you are given an objects speed you can definitely determine it's velocity 4. Two objects traveling the same velocity must have the same speed...

Question

7. In each case below, determine the effect on the sellers' total revenue and identify whether...

Solutions

Expert Solution

Related Solutions

For each of the following, identify whether total revenue rises, falls, or remains constant:

In each case below, identify the effect on the demand for ice cream. a. An increase...

Determine the effect of the following errors on a company's total revenue, total expenses, and net...

In each of the following cases identify whether the change is an income effect, a substitution...

For each of the questions below, a histogram is described. Indicate in each case whether, in...

For each of the questions below, a histogram is described. Indicate in each case whether, in...

Direction: For each of the ff sentences, determine whether that cause and effect relationship is valid...

For each of the 7 groups of chemical agents, identify the mechanism of action and determine...

Determine for each statement below by listing true or false, on whether or not it is...

Determine whether each of the statements below is true or false, and place it in the...