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**Unformatted text preview: **Notes - Chapter 6 1. The price elasticity of demand for imported whiskey is estimated to be -0.20 over a wide interval
of prices. The federal government decides to raise the import tariff on foreign whiskey, causing
its price to rise by 20%. Will sales of whiskey rise or fall and by what percentage? E: ’.20 E ”'50.
A‘).P 1 #20.)- - 9‘5?
59‘0“? _ 1 -. 9.150. 4".20 ”LIB“ -. :34- 2. A manager of a local movie theater believes that the price elasticity of demand for matinee
tickets is -1.6 over the range of ticket prices that the theater would consider charging. The manager would like to boost matinee ticket sales by 15%. By what percentage must he
decrease the matinee ticket price? .‘r 3 .715“
—\-‘° " 9.1;? QOAP" acq Q“). PM“ gubrab‘u-ﬂ- ’r L
‘TQ‘REsQ. FIGURE 6.1
ChathoﬂmofBordedituMusicEnwiun Quantity effect dominates Price effect dominates 24 24 .75: 3? IE I
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g g 16
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g 5
a a 9 ..
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0 600 800 ”001,300 2,400 O 600 800 1,500 1,700 2,400
QuonﬁtyofCDspetweel: Quantity oi CDs per week
MA—Analuﬁcugionofdumnd Padl-Aniulusﬁcngionddunmd .9 “Q u\% that: . \°,8°° "rﬁ‘ : ?\- VQ. '=- \‘O‘EDO ‘- \1.3°§ \m / Te ? ‘a 5 q“s°° g \3‘§D° 5 Iv ‘ I. «re _ ‘9 ‘Q‘i —‘ *‘190 E \\,q 0‘
° ‘ p (77.377763 3. Compute the elasticities for the intervals AB and EF above.
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AG P (loot-13°) 4-3 1:0 4-?» iluﬁhﬁ-
E _ .I—u—n ._ - c .— = ‘ﬁ— ’ ‘— =\ L. ‘4-
Ag ' AP ‘ Q ' (A's-4+) 91f '1 115
b. Compute the total revenue for the points A, B, E and F above. What is the change in total revenue when moving from point A to point B? What is the change in total revenue when
moving from point E to point F? How does this relate to the elasticities over these intervals? *blc FLT .
. ’— .—-——— g . ‘Q \. *“ mﬁvrﬁ
tﬁF o d. .33‘ . S G ~s +u1r 1:.
1'29. ' +411?!) =33,noo ATE“, =__uggqg1g)*(m-§,o‘°3
Tﬂg =. A1.“ ineb‘. ALuoa I§TA ' . “5"ng ngAag: qqmtﬁ e—H' 4. Given a demand function Q = 1% + 3M and M=10. Calculate the quantity demanded and the
point elasticity when P=2. ...

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- Spring '08
- ISSE