Based only on the concept of demand elasticity: When would you recommend raising the price of...

Based only on the concept of demand elasticity:

When would you recommend raising the price of the good? Explain why.

When would you recommend lowering the price of the good? Explain why.

When would you recommend keeping the price of the good unchanged? Explain why.

Expert Solution

1) The price of the good can be increased when the demand is inelastic.

When the demand is inelastic,it means that the percentage change in demand is less responsiveness to the percentage change in price so a high price can be charged to generate maximum revenue when the demand is inelastic.

2) The price of the good should be decreased when the demand is elastic.

When the demand is elastic,it means that the quantity demanded would change by a large extent with the change in price so if the firm increases prices,quantity demanded would decrease and the firm would incur loss so,it is best to decrease the price when the demand is elastic.

3 ) The price of the good should remain same when the elasticity of demand is unitary

In this case the percentage change in price would cause a equal percentage change in demand so that there would be no effect on the total revenue so its better to keep the prices same.

Rahul Sunny answered 2 years ago

a. Using the concept of price elasticity of demand, explain the conditions under which it would...

a. Using the concept of price elasticity of demand, explain the conditions under which it would be rational for pharmaceutical companies to reduce the supply of drugs. Explain carefully. b. Under the conditions you have identified, what do you think the appropriate response of the government should be? Explain your answer.

A product has unit elasticity of demand when the price elasticity of demand is A. less...

A product has unit elasticity of demand when the price elasticity of demand is A. less than 1. B. equal to 0. C. equal to 1. D. greater than 1.

The price elasticity of demand for cereal is 5 based on this elasticity what will percentage...

The price elasticity of demand for cereal is 5 based on this elasticity what will percentage change in quantity of breakfast cereal as a result of 5% decrease in cereal's price? A 5% B 1% C -1% D 25%

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...

The price elasticity of the demand for gasoline is .02. The price elasticity of demand for...

The price elasticity of the demand for gasoline is .02. The price elasticity of demand for gasoline at Joe’s service station is 1.2. Explain what might account for the difference in elasticities.

The price elasticity of demand for product A is 2.32. The price elasticity of demand for...

The price elasticity of demand for product A is 2.32. The price elasticity of demand for product Z is 0.12. This difference could be due to the fact that A. there are many good substitutes for product A and few substitutes for product Z. B. there are many good substitutes for product Z and few substitutes for product A. C. product A is a necessity and product Z is a luxury. D. product Z is a necessity and product A...

Price Elasticity of Demand. Discuss the price elasticity of demand. Is it directly related to the...

Price Elasticity of Demand. Discuss the price elasticity of demand. Is it directly related to the availability of suitable substitutes for a product? Please integrate the Bible passages in your discussion.

Discuss factors affecting the Price Elasticity of Demand, Income Elasticity of Demand, and Cross-price Elasticity of...

Discuss factors affecting the Price Elasticity of Demand, Income Elasticity of Demand, and Cross-price Elasticity of Demand for LUX, a five-star resort in the Maldives. Identify any unique amenities of the resort and forms of transportation to the remote islands. Discuss why forecasting is critical for the success of the one island, one resort concept. Mention the importances of demand (i.e. effective demand, elasticity, inelasticity) and price while tying in with the topic. At least 200 words (important). Thanks in...

2. a. Using the concept of price elasticity of demand, explain the conditions under which it...

2. a. Using the concept of price elasticity of demand, explain the conditions under which it would be rational for pharmaceutical companies to reduce the supply of drugs. Explain carefully. (10 points) b. Under the conditions you have identified, what do you think the appropriate response of the government should be? Explain your answer.

Define price elasticity of demand. b. How would the "elasticity of umbrellas" be defined? Assume that...

Define price elasticity of demand. b. How would the "elasticity of umbrellas" be defined? Assume that the elasticity of umbrellas relates the number of days of rain to the number of times you use an umbrella

Question