Managerial Economics

PROBLEM SESSION #3 ELASTICITY OF DEMAND AND grant Q.1 mercy mensesly buys 100 bottles of her favorite wine at the real impairment of $2. When asked at what value she would stop buying the intersection point (the lowest toll at which quantity inviteed is zero units), she answers $6. Based on this information alone, roughly estimate explodes price centering? (1 line) Q.2Present 2 reasons wherefore assuage has a very low price elasticity of wish for. (2 lines) Because there is no direct substitute and because con toters spend individual(a) small percentage of their incomes on saltiness. No close substitutes and salt consumption represent a small fraction of family line expenditure. Q.3T/F and why: A high fill for cigarettes sum ups smoking and puts a burden on aesculapian sentry duty paid for by all members of society. A higher demand pull up stakes increase smoking merely if supply is non vertical. If supply is downward sloping or horizontal, a higher demand will lead to more cigarettes consumed. Although medical exam bills increase as more smokers get sick, smokers whitethorn as well give off early than the rest of the population. Hence it is practicable 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, asseverate: We strongly decide the market. We have pricing power. We organized the price to $100 from $80 and sales dropped only slightly. I believe we can raise prices further. If we mak e more benefit when the price is $100, then! we will make even more profits when the price is $ cxx and keep the price at $ capital hundred. Comment on the remarks. The manager apparently assumes that if demand is inelastic in the $80-$100 price segment, it will continue to be inelastic in the $100-$long hundred segment. However, consider that substitutes that were previously not economical may pass more engaging 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: OrderCustomPaper.com

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