Adam makes specialized garden figurines in a small shop on his property, and his monthly total...

Adam makes specialized garden figurines in a small shop on his property, and his monthly total sales revenue is $800 when he charges $16 for each figurine. One month, he tried lowering his price to $14, and his total sales revenue that month was $840. On the basis of these data, what is the price elasticity of demand for Adam’s product? Round your answer to 2 decimal places.

Solutions

Expert Solution

Total Revenue = Price x Quantity

So we can find the quantity demanded from this formula for both the prices.

Price	Quantity Demanded	Total Revenue
$16	50	800
$14	60	840

Price elasticity of demand = % Change in Quantity demanded / % Change in Price

% Change in Quantity demanded = 60 - 50 / 50 x 100

% Change in Quantity demanded = 10 / 50 x 100

% Change in Quantity demanded = 20%

% Change in Price = 14 - 16 / 16 x 100

% Change in Price = -2 / 16 x 100

% Change in Price = -12.5%

Price elasticity of demand = % Change in Quantity demanded / % Change in Price

Price elasticity of demand = 20 / -12.5

Price elasticity of demand = 1.6

Negative sign is ignored in price elasticity of demand

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Adam and Eve live on two sides of the Garden of Eden, a small suburban development....

Adam and Eve live on two sides of the Garden of Eden, a small suburban development. After they move in, an old PCB dump is discovered in between their houses. If X total tons of PCB's are removed from the dump, the two have a true willingness to pay (WTP) to finance a clean-up equal to: ADAM's WTP = 10 - X EVE's WTP = 6 - X a. Adam's WTP is higher than Eve's. Does this necessarily imply that...

Rex loves to work with his hands and is very good at making small figurines. Three...

Rex loves to work with his hands and is very good at making small figurines. Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. Rex received approval from the IRS to switch from the cash method...

12. Rex loves to work with his hands and is very good at making small figurines....

12. Rex loves to work with his hands and is very good at making small figurines. Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. Rex received approval from the IRS to switch from the cash...

Rex loves to work with his hands and is very good at making small figurines. Three...

Rex loves to work with his hands and is very good at making small figurines. Three years ago, Rex opened Bronze Age Miniatures (BAM) for business as a sole proprietorship. BAM produces miniature characters ranging from sci-fi characters (his favorite) to historical characters like George Washington (the most popular). Business has been going very well for him, and he has provided the following information relating to his business. a. Rex received approval from the IRS to switch from the cash...

Rex loves to work with his hands and is very good at making small figurines. Three...

1. Jacob’s monthly income is $2,800 and his monthly expenses total around $2,000. He has been...

1. Jacob’s monthly income is $2,800 and his monthly expenses total around $2,000. He has been contemplating how to use his about $800 surplus. He has the following financial records: Cash in his bank account $560 Investment in a mutual fund which he can easily convert to cash $850 Car (valued at) $12,000 Household personal possessions $2,850 Credit card balances $1,250 Miscellaneous short-term debts $520 Student loan balance $8,500 Balance on car loan $4,500 a) Calculate current ratio, liquidity ratio...

Jacob’s monthly income is $2,800 and his monthly expenses total around $2,000. He has been contemplating...

Jacob’s monthly income is $2,800 and his monthly expenses total around $2,000. He has been contemplating how to use his about $800 surplus. He has the following financial records: Cash in his bank account $560 Investment in a mutual fund which he can easily convert to cash $850 Car (valued at) $12,000 Household personal possessions $2,850 Credit card balances $1,250 Miscellaneous short term debts $520 Student loan balance $8,500 Balance on car loan $4,500 Prepare balance sheet for Jacob.

Randy Reseller operates a small shop on the beach that sells a surfboard. After getting his...

Randy Reseller operates a small shop on the beach that sells a surfboard. After getting his April income statement he “Yelled I’ll never understand this accounting stuff. Last month (June) we sold 1,000 surfboards and earned $68,500 in operating income. This month (July) we sold 1,500. I thought we would make $102,750. However, his income statement for July shows a net income of $121,000. He is frustrated and says how can I ever make plans if I can’t predict my...

The Pat-A-Cake Pastry Shop makes chocolate cake in three sizes – Small, Medium, and Large. For...

The Pat-A-Cake Pastry Shop makes chocolate cake in three sizes – Small, Medium, and Large. For each size, the number of cakes made is an integer (i.e. the shop does not bake only half of a cake). The shop has the following amounts of the three main ingredients on hand – 400 ounces of cake flour, 550 ounces of caster sugar, and 150 ounces of cocoa powder. The table below provides details on the amount of each ingredient required for...

Arnold purchased a new printing machine and started a small printing shop. As per his calculations,...

Arnold purchased a new printing machine and started a small printing shop. As per his calculations, to earn revenue of $4,000 per month, he needs to sell printouts of 20,000 sheets per month. The printing machine has a capacity of printing 35,500 sheets per month, the variable costs are $0.03 per sheet, and the fixed costs are $2,000 per month. a. Calculate the selling price of each printout. Round to the nearest cent b. If they reduce fixed costs by...

Subjects