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Chapter 6 Problem 6

# Chapter 6 Problem 6 - CHAPTER[I'5 1What can you oouclude...

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Unformatted text preview: CHAPTER [I '5. 1What can you oouclude about the price elasticiiq.r of demand in each of the following statements? I. “The pizza deliver].r business in this town is very competitive. I'd lose half to].r cus— tomers if] raised iile price by as little as 10%." ﬁle price elasticit}r of demand is ﬂ=5 res-s So demand is elasiic. II. III owned hoﬂl of ﬁre two Jerry Garcia autographed lithographs In existence. 1 sold one on eiiia}r for a high price. But when i sold the second one, the price dropped by sofas." The fact ﬁlat itwas necessar].r for price to drop by 30% in order to sell one more unit [an increase in quanﬂty of sass, using,r the midpoint method} indicates that the demand for Jerry Garcia autographed lithographs is inelastic. moss _ 30% _ So demand is elastic. 1.25 1:. "My eoonomics professor has chosen to use the Krugmani'Wells textbook for ﬂus class. I have no choioe but to hug.r mis hook." There is no substitute available, so demand Is inelastic. d. "i always spend a toinl of Elia-3thr \$111] per week on coffee." Demand is unit—elastic: no matter what the price of coffee is. The total revenue to the producer {which is Il'ijl' total expenditure on coffee] remains the same. ...
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