Extracted text: Question 3 A local firm produces three types of pizza, for delivery to homes in the area. The owners have completed research, to discover the demand curves for each of the three pizzas. The schedules are shown below: (Quantities are per week). Pric Pizza A Pizza B Pizza C e (Qd) (Qd) (Qd) 12 800 100 11 840 200 10 880 400 300 9 920 800 400 8 960 1200 500 1000 1600 600 6 1040 2000 700 5 1080 2400 800 Plot the three demand curves, on one graph.Calculate PED for all three pizzas over the price increases from £9 to £10. For pizza C only, what price must be charged if the firm wishes to maximize its sales revenue? (Hint: more elastic demand will affect the revenue adversely). Question 4 What can you conclude about the price elasticity of demand in each of the following statements? a. "The pizza delivery business in this town is very competitive. I'd lose half my customers if I raised the price by as little as 10%." b. "I owned both of the two Jerry Garcia autographed lithographs in existence. I sold one on eBay for a high price. But when I sold the second one, the price dropped by 80%." c. "My economics professor has chosen to use the Krugman/Wells textbook for this class. I have no choice but to buy this book." d. "I always spend a total of exactly $10 per week on coffee." Question 5 Do you think the price elasticity of demand for Ford sport-utility vehicles (SUVS) will increase, decrease, or remain the same when each of the following events occurs? Explain your answer. a. Other car manufacturers, such as General Motors, decide to make and sell SUVS. b. SUVS produced in foreign countries are banned from the American market. c. Due to ad campaigns, Americans believe that SUVS are much safer than ordinary passenger cars. d. The time period over which you measure the elasticity lengthens. During that longer time, new models such as four-wheel-drive cargo vans appear.
Extracted text: 15:34 Exercise Question 1 Work out the Price Elasticity of Demand for each, and comment on your result. A. The price of a smartphone is currently £200, and the quantity demanded is 4m. Next year the price falls to £180 and the quantity demanded rises to 6m. B. The price of pens today is £1, and the quantity demanded is 1m. Next year the price rises to £1.10 and the quantity demanded falls to 950,000. C. The price of a daily newspaper today is £1.50p, and the quantity demanded is 2m. Next year the price falls by 30p and the quantity demanded rises to 2.2m Question 2 RCO Manufacturing is an electronics manufacturer and retailer. Its main products are ultrabook computers, PCs and calculators. The current price of the ultrabook is £500, the PC is £800 and the calculator is £40. This year the firm sold 10,000 ultrabooks, 20,000 PCs and 1 million calculators. In an attempt to improve revenue the managers of the firm have decided to increase all prices by 10%. Market research has suggested that the price elasticity of demand for each product is: Ultrabook: (-) 1.5; PC: () 2.5; calculator: (-) 0.6 You have been asked to evaluate the planned price increases. Comment on the planned price changes. Would a 10% price reduction have been better for some or all of the products? What benefit (if any) would advertising bring to the firm? (You should support any arguments with calculations.) Question 3 A local firm produces three types of pizza, for delivery to homes in the area. The owners have completed research, to discover the demand curves for each of the three pizzas. The schedules are shown below: (Quantities are per week). Pric Pizza A Pizza B Pizza C (Qd) (Qd) (Qd) 12 800 100 11 840 200 10 880 400 300 9 920 800 400