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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“
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‘TQ‘REsQ. FIGURE 6.1
ChathoﬂmofBordedituMusicEnwiun Quantity effect dominates Price effect dominates 24 24 .75: 3? IE I
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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 PadlAniulusﬁcngionddunmd .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 (loot13°) 43 1:0 4?» iluﬁhﬁ
E _ .I—u—n ._  c .— = ‘ﬁ— ’ ‘— =\ L. ‘4
Ag ' AP ‘ Q ' (A's4+) 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

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