Initial values are: This function is: PM $20000 PG = $1.00 I = $15000 A = $1000 QT = 200-.01PT +.005PM -10PG +.011 +.003A 1.(a). Use the above to calculate the arc price elasticity of demand between PT = $20000 de P₁ + P₂ The arc elasticity formula is:Ep AQ ΔΡ Q₁ +22 (b). Judging from the computation in (la), do you expect the revenue resulting from the p increase, remain the same, or decrease relative to the revenue at the price of $20000? (Hint: Truett). Explain your choice. 2.(a) Calculate the point price elasticity of demand for Toyotas at PT= $20000 (which shoul variables and their values are given at the top, before question #1. The formula is: aQT PT Ep OPT QT (b). Does this elasticity indicate that Toyota demand is relatively responsive to changes in T why not. 3.(a). Calculate the point gasoline cross-price elasticity between (PG) and Toyota demand (Q gasoline is PG = $1.00. Use Pr = 20000 (which should make Qr=270). Other variable at the top, before question #1. The formula is: дот PG ETG OPG QT (b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to chan (PG)? Explain why or why not. 4.(a). Competition might be a worry for Toyota. PM = the price of Mazadas. Calculate the p elasticity of demand with PM = $20000 and PT = $20000 (which should make Qr = 270 at the top before question #1. The formula is: Етм JOT Pm dPm LT (b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to chan
Initial values are: This function is: PM $20000 PG = $1.00 I = $15000 A = $1000 QT = 200-.01PT +.005PM -10PG +.011 +.003A 1.(a). Use the above to calculate the arc price elasticity of demand between PT = $20000 de P₁ + P₂ The arc elasticity formula is:Ep AQ ΔΡ Q₁ +22 (b). Judging from the computation in (la), do you expect the revenue resulting from the p increase, remain the same, or decrease relative to the revenue at the price of $20000? (Hint: Truett). Explain your choice. 2.(a) Calculate the point price elasticity of demand for Toyotas at PT= $20000 (which shoul variables and their values are given at the top, before question #1. The formula is: aQT PT Ep OPT QT (b). Does this elasticity indicate that Toyota demand is relatively responsive to changes in T why not. 3.(a). Calculate the point gasoline cross-price elasticity between (PG) and Toyota demand (Q gasoline is PG = $1.00. Use Pr = 20000 (which should make Qr=270). Other variable at the top, before question #1. The formula is: дот PG ETG OPG QT (b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to chan (PG)? Explain why or why not. 4.(a). Competition might be a worry for Toyota. PM = the price of Mazadas. Calculate the p elasticity of demand with PM = $20000 and PT = $20000 (which should make Qr = 270 at the top before question #1. The formula is: Етм JOT Pm dPm LT (b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to chan
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Initial values are: PM $20000 PG = $1.00 I = $15000 A = $10000
QT 200 -.01PT +.005PM -10PG +.011 +.003A
This function is:
1.(a). Use the above to calculate the arc price elasticity of demand between Pr = $20000 decreasing to PT = $10000.
AQ
P₁ + P₂
The arc elasticity formula is:Ep
ΔΡ
Q₁ +2₂
(b). Judging from the computation in (1a), do you expect the revenue resulting from the price decrease to $10000 to
increase, remain the same, or decrease relative to the revenue at the price of $20000? (Hint: see the table on page 65 of
Truett). Explain your choice.
2.(a) Calculate the point price elasticity of demand for Toyotas at PT= $20000 (which should make Q₁ = 270). Other
variables and their values are given at the top, before question #1. The formula is:
dQT PT
Ep = ●
арт LT
(b). Does this elasticity indicate that Toyota demand is relatively responsive to changes in Toyota price? Explain why or
why not.
3.(a). Calculate the point gasoline cross-price elasticity between (PG) and Toyota demand (QT). Assume the price of
gasoline is PG = $1.00. Use Pr = 20000 (which should make Qr = 270). Other variables and their values are given
at the top, before question #1. The formula is:
QT PG
ETG
●
QT
=
Етм
OPG
=
=
(b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to changes in the price of gasoline
(PG)? Explain why or why not.
●
4.(a). Competition might be a worry for Toyota. PM = the price of Mazadas. Calculate the point Mazada cross-price
elasticity of demand with PM = $20000 and PT = $20000 (which should make Qr = 270). Other variables are given
at the top before question #1. The formula is:
Pm
ƏQT
apm От
●
(b). Does this elasticity indicate that the demand for Toyotas is relatively responsive to changes in the price of
Mazadas? Explain why or why not.
aQT A
DA
5.(a). Calculate the point advertising elasticity of demand for advertising expenditures (A) = $10000 also with PT=
$10000 (which should make Qr= 370). Other variables and their values are given at the top, before question #1. The
formula is:
EA =
QT
(b). Does this elasticity indicate that demand for Toyotas is very responsive to changes in advertising expenditures (thus
suggesting that advertising is a very important way to increase sales)? Explain why or why not.
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