Question

In: Economics

As a demand analyst working for a supermarket chain, you have obtained the following information from...

As a demand analyst working for a supermarket chain, you have obtained the following information from your stores' price scanner system: as the price of avocados decreases from 40¢ to 30¢ , the quantity demanded of avocados in your areas changes from 18,000 to 22,000 avocados per week.

a. find the own price elasticity for avocados. (You do not need to show your work, just enter in the final answer)

b. Is demand for avocados relatively elastic or inelastic? Would it be a wise move on the part of the supermarket to lower prices from 40¢ to 30¢, in terms of total revenue generation (be specific‑‑show the dollar change in total revenue that occurs)?

Expert Solution

a. The own price elasticity of demand is -0.88

P

Q

% change in P

% change in Q

Ed

40

18000

30

22000

=(30-40)/40

=-0.25

=(22000-18000)/18000

=0.22

=0.22/-0.25

=-0.88

b. The demand for avocados is inelastic as the value of the elasticity is less than 1 in absolute terms

P

Q

TR

Change in TR

40

18000

=40*18000=720000

30

22000

=30*22000=660000

=660000-720000

=-60000.00

No, the move to reduce the price from 40 to 30 C, is not a wise move as we can observe that the total revenue decreases. The total revenue at 40 C is 720000 and at 30 C is 660000, change in total revenue is 60000

Rahul Sunny answered 2 years ago

An analyst evaluating securities has obtained the following information.

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

As an analyst, you have gathered the following information on a company you are tracking. The...

As an analyst, you have gathered the following information on a company you are tracking. The current dividend is $0.75. Dividends are expected to grow at a rate of 12% over the next three years, decline linearly to 4% over the next six years, and then remain at a long-term equilibrium growth rate of 4% in perpetuity. The required return is 9%. The value of the company is closest to: a) $20.25. b) $23.2056 c) $78.25 d) $15.76 e)...

You have obtained information on the supply and demand for gasoline. The market supply function has...

You have obtained information on the supply and demand for gasoline. The market supply function has been estimated to be Qs= P and the market demand function has been estimated to be Qd = 2.5 - 0.25P. The government has decided to implement a $2 per-unit tax on each unit (gallon) of gasoline sold. You have been hired to determine the likely impact of this tax. a. What is the price of gasoline before the tax is implemented? What price...

After graduating from University you obtained a job and have been working there for three years....

After graduating from University you obtained a job and have been working there for three years. You recently obtain a promotion and a bonus of $20,000 that you decided to use to buy a house. The cost of the property is $100,000 and a down payment of 20% is required. There are $1000 of closing costs (added to the loan) and no points. The mortgage loan term is 30 years and the interest rate is fixed at 3% per year...

In the audit of Andy, you have obtained the following information in relation to the client’s...

In the audit of Andy, you have obtained the following information in relation to the client’s internal control over the sales and collection cycle. Andy Pty Ltd (Andy) is operating in the retailing sector selling a wide range of electrical products, such as computers, headphones, smart televisions. All sales are for credit. Customer orders are received in the order department by a clerk who is responsible for preparing three copies of pre-numbered sales order forms. After the sales order form...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.2%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.2% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.9% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.6% next year, 3.6% the following year, 4.6% the third year, and 5.6% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.3%...

An analyst evaluating securities has obtained the following information. The real rate of interest is 2.3% and is expected to remain constant for the next 5 years. Inflation is expected to be 2.1% next year, 3.1% the following year, 4.1% the third year, and 5.1% every year thereafter. The maturity risk premium is estimated to be 0.1 × (t – 1)%, where t = number of years to maturity. The liquidity premium on relevant 5-year securities is 0.5% and the...

You are given the following information obtained from a sample of 5 observations taken from a...

You are given the following information obtained from a sample of 5 observations taken from a population that has a normal distribution. 76 67 83 61 63 Develop a 98% confidence interval estimate for the mean of the population.

The following information was obtained from independent random samples. The Degrees of Freedom have be calculated...

The following information was obtained from independent random samples. The Degrees of Freedom have be calculated to be 19. The Standard Deviations are Unknown. Small Sample Size: Use t-value Sample 1 Sample 2 Sample Mean 45 42 Sample Variance 85 90 Sample Standard Deviation Sample Size 10 12 Standard Error Confidence Coefficient 0.95 Level of Significance Degrees of Freedom 19 t-value Margin of Error Point Estimate of Difference 3 Lower Limit Upper Limit The t-value for the sample is