Managerial Economics

PROBLEM SESSION #3 ELASTICITY OF DEMAND AND cater Q.1 mercy mensesly buys 100 bottles of her favorite wine at the contemporary impairment of $2. When asked at what monetary value she would stop buying the crossbreeding (the lowest expense at which quantity inviteed is zero units), she answers $6. Based on this information alone, roughly estimate hit the ceilings price centering? (1 line) Q.2Present 2 reasons wherefore duration has a very low price elasticity of wawl for. (2 lines) Because there is no direct substitute and because con jointers spend wizard small percentage of their incomes on table salt. No close substitutes and salt consumption represent a small fraction of family expenditure. Q.3T/F and why: A high expect for cigarettes sum ups smoking and puts a burden on aesculapian safety device paid for by all members of society. A higher demand pull up stakes increase smoking barely if supply is non vertical. If supply is downward sloping or horizontal, a higher demand will lead to more cigarettes consumed. Although aesculapian bills increase as more smokers get sick, smokers whitethorn withal give off early than the rest of the population. Hence it is practical for smokers to reduce medical bills overall and reduce the burden on society. Q.4At a recent company meeting, you heard, one of the passenger vehicles, feel out: We strongly decide the market. We have pricing power. We organized the price to $100 from $80 and sales dropped only slightly. I telephone we can raise prices further. If we make more lucre when the price is $100, then we will make even more profits when the price is $ cxx and keep the price at $ large hundred. Comment on the remarks. The manager apparently assumes that if demand is inflexible in the $80-$100 price segment, it will continue to be inelastic in the $100-$long hundred segment. However, consider tha t substitutes that were antecedently not eco! nomical may pass more enchanting if the price increases to $120. Thus the $100 - $120 segment may be elastic. As the price increases, revenues fall...If you take to get a full essay, order it on our website: OrderEssay.net

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