​All questions must be answered in details ELASTICITY

timer Asked: Feb 13th, 2018
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Question description

All questions must be answered in details


1. Suppose that Bill’s Thrift Mart annual Founder’s Day sale, when all prices in the store are reduced by 50%, results in its sales doubling compared to a typical day. (a) What is Thrift Mart’s price elasticity of demand? (b) Is the Founder’s Day sale a good idea for the store?

2. List three examples of an inferior good (not discussed in class or in the text). Justify your choice of examples.

3. How responsive are your grades to a change in the amount of studying you do? For example, if you increased your study time by 25%, how would your grades respond? State these estimates as elasticities. Are your estimates high or low? Would it be worth your while to study more for each class? Explain.

4. Jumping Joe’s Night Club has found that when they offer half price admission to the club on Wednesday nights (when business is typically slow), their total revenue rises. (a) Is their demand elastic? Explain. (b) Is it a good idea for them to continue with this promotion? Why?

5. Absolut Vodka ran the same advertising campaign for about 20 or 30 years. What must the company have believed to be its advertising elasticity of demand? Explain.

7. The elasticity of demand for Dave’s Famous is Pizza is 2.6. Dave is considering raising pizza prices by 20%. Is this a good idea? What will happen to his sales? His total revenue? Explain.

Tutor Answer

School: UT Austin


o Introduction
o Formula
o Calculation
❖ Inferior goods
o Examples
o Justification
❖ Sensitivity of class grades to study time
❖ Nightclub
o Determination of elasticity
o Explanation
o Determining whether to continue
o Rationale
❖ Absolut vodka
o Company’s conviction
o Explanation
❖ Dave’s Pizza
o Interpretation of the elasticity
o Implication of the rise
o Explanation

Elasticity 1
Running Head: Elasticity


Elasticity 2
1. Price elasticity of demand (PED) is a measure of how the quantity demanded changes when
the commodity’s price is altered. PED is measured by expressing the change in quantity
demanded as a fraction of the change in price as follows:
a. 𝑃𝐸𝐷 =

% 𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 ...

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Thanks for the help.

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