Microeconomics Chapter 6 - 3793 Words

CHAPTER 6| Elasticity: The Responsiveness of Demand and Supply SOLUTIONS TO END-OF-CHAPTER EXERCISES Answers to Thinking Critically Questions 1. Even if the overall demand for gasoline is inelastic, a revenue increase for Joe’s Gas-and-Go will occur only if the percentage increase in price is greater than the percentage decrease in quantity demanded. If Joe’s price increase is too large and Joe has other competitors who do not raise their prices, then it is possible that the percentage decrease in quantity demanded will result in a decrease in total revenue. 2. If Wal-Mart and Sam’s Club begin selling gasoline at lower prices than the conventional service stations, this will cause the demand curves faced by the†¦show more content†¦Total revenue fell during this time from $36,359,219 to $33,312,474. 123 CHAPTER 6 | Elasticity: The Responsiveness of Demand and Supply 1.8 No, we don’t have enough information to calculate the price elasticity of demand. To calculate the price elasticity of demand we would need to know how the quantity demanded changed in response to a change in price keeping all other things constant. In this case other things were not held constant: academic offerings were bolstered with at least three hands-on experiences outside the classroom, which created a â€Å"buzz.† This suggests that there was a shift in the demand curve and not just a movement along it. 1.9 Using the midpoint formula, the percentage change in price = ($99 – $199/$149) = –67%. Using the midpoint formula, if sales double, then the percentage change in quantity will equal 67%. The price elasticity of demand is 67%/–67% = –1. Using the midpoint formula, if sales triple, then the percentage change in quantity demanded will equal 100%. In this case, the price elasticity of demand will be 100%/– 67% = –1.49. 1.10 Suppose Ford didShow MoreRelatedEssay about Economics and Essential Work Equipment663 Words   |  3 Pagesï » ¿CHAPTER 1    a. 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