The price elasticity of demand is a measure of how much the demand for a product...

The price elasticity of demand is a measure of how much the demand for a product is affected by a change in price. Review the following scenario and answer the questions that follow.

Evelyn makes $15,000 per year and Tami makes $150,000 per year. They are both buying roast beef at the grocery store. Evelyn asks for $10 worth of roast beef, and Tami asks for 10 pounds of roast beef.

What is each consumer’s price elasticity of demand?
Identify examples of situations that would affect the marginal utility of roast beef for each consumer. Explain how each consumer’s marginal utility of roast beef would be affected by each factor.

Solutions

Expert Solution

Rahul Sunny answered 11 months ago

Next > < Previous

Related Solutions

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...

The price of gasoline is $2.00 and the price elasticity of demand is -0.4. a)How much...

The price of gasoline is $2.00 and the price elasticity of demand is -0.4. a)How much will a 10% reduction in quantity placed on the market increase the price? b) If -0.4 is a short run elasticity, do you expect that this price increase brought about by this reduction in quantity will be more of less in the long run? Why? Show work.

Variations in the value of the price elasticity of demand are important for how much and...

Variations in the value of the price elasticity of demand are important for how much and at what price a company wants to operate. Based on your understanding on the concept of price elasticity, throughly discuss: 1. Why the price elasticity varies along the demand curve using the example of a linear demand curve; 2. Why a company has to be careful where it operates along its demand curve if it pursues the goal of increasing sales.

how to find the price elasticity if the quantity demand is 2 and the product price...

how to find the price elasticity if the quantity demand is 2 and the product price is 9

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.

If the short run price elasticity of demand is -.20 how much will a 10 percent...

If the short run price elasticity of demand is -.20 how much will a 10 percent increase in the price of oil decrease the quantity demanded? Given this price elasticity will the total revenue received by oil producers increase or decrease when oil prices rise? Explain why the price elasticity of demand for oil more elastic in the long run. Draw your long run demand curve.

1.a.In words, what does the cross price elasticity of demand measure? b.Would the cross price elasticity...

1.a.In words, what does the cross price elasticity of demand measure? b.Would the cross price elasticity of demand between Evian bottled water and Fiji bottled water be positive or negative? Explain. c.Which would be larger (in absolute value), the cross price elasticity of demand between Evian and Fiji water or that between Evian water and Sprite soda? Explain briefly.

Multiple-Choice Questions 1) The price elasticity of demand is a measure of A) the responsiveness of...

Multiple-Choice Questions 1) The price elasticity of demand is a measure of A) the responsiveness of the quantity demanded to price changes. B) the quantity demanded at a given price. C) the shift in the demand curve when price changes. D) the demand for a product holding price constant. 2) The elasticity of demand for a product is likely to be greater A) the smaller the number of substitute products available. B) the smaller the proportion of one's income spent...

In general, the price elasticity of demand for a product will be greater (a) the larger...

In general, the price elasticity of demand for a product will be greater (a) the larger the number of close substitutes, (b) the greater the share of budget an item takes, (c) the more the item is considered to be a luxury, and (d) the narrower the market is defined (for example, a specific brand name vs. an entire market). Costco (www.costco.com) posts its sales (discount) items. Select at least 5 sales items, and evaluate the price elasticity of demand...

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...

Subjects