2. The demand function for bottled water from Stillwater Springs is Q=25-10P + 51 Where P = the price of a 36-bottle case of the water and I = Average per capita income (in thousands of dollars). a. If I = 15 thousand dollars, what is the demand curve for bottled water? Q b. At P= $4, what is the point price elasticity of demand? What can you say about the profitability of a water sale? EQxPx A sale will increase profits/ reduce profits/ have an indeterminate effect on profits (Circle one)

2. The demand function for bottled water from Stillwater Springs is Q=25-10P + 51 Where P = the price of a 36-bottle case of the water and I = Average per capita income (in thousands of dollars). a. If I = 15 thousand dollars, what is the demand curve for bottled water? Q b. At P= $4, what is the point price elasticity of demand? What can you say about the profitability of a water sale? EQxPx A sale will increase profits/ reduce profits/ have an indeterminate effect on profits (Circle one)

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 17SQ

See similar textbooks

Similar questions

Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?
What is the formula for the income elasticity of demand?
The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
What is the price elasticity of demand? Can you explain it in your own words?
If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?
Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?
The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?