{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

14209an4.11-14

14209an4.11-14 - Example 3 If E p = 2 5 and price is...

This preview shows pages 1–4. Sign up to view the full content.

c Kendra Kilmer February 27, 2009 Section 4.7 - Elasticity of Demand Example 1: A broker is trying to sell you two stocks: Biotech and Comstat. The broker esti- mates that Biotech’s earnings will increase \$2 per year over the next several years, while Comstat’s earnings will increase only \$1 per year. Which stock should you purchase? Definition: Relative and Percentage Rates of Change The relative rate of change of a function f ( x ) is The percentage rate of change is Example 2: If Biotech costs \$100 per share and Comstat costs \$25 per share, what are their relative and percentage rates of change? 11

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
c Kendra Kilmer February 27, 2009 Elasticity of Demand: If price and demand are related by x = f ( p ) , then the elasticity of demand is given by What does E ( p ) tell me? 12
c Kendra Kilmer February 27, 2009 Summary:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Example 3: If E ( p ) = 2 . 5 and price is decreased by 2%, what happens to demand? Does the revenue increase or decrease? 13 c ± Kendra Kilmer February 27, 2009 Example 4: Given that x = f ( p ) = 1875-p 2 , determine whether demand is elastic, inelastic, or has unit elasticity at the indicated values of p . a) p = 15 b) p = 25 c) p = 40 Example 5: The price-demand equation for home-delivered 12-inch pizzas is p = 16 . 8-. 002 x where x is the number of pizzas delivered weekly. The current price of one pizza is \$8. In order to generate additional revenue from the sale of 12-inch pizzas, would you recommend a price increase or a price decrease? Section 4.7 Homework Problems: 13-21(odd),25,29,41,43,45 and supplemental problems 14...
View Full Document

{[ snackBarMessage ]}

What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern