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Imagine you are one of the managers in your company, and in the next business meeting you will be discussing with other managers and the company's CEO the price strategy for the Spring, Summer, Fall, and Winter seasons this year. Your price strategy would be one of the following:
To make this decision, you will use the information from a report that the CEO provided you last week about the price elasticity of demand. You need to decide on your own what this report contains.
As an example, you can consider that the report states that the price elasticity of demand for your company's product last year has been -1.4 from January to May, -0.8 from June to Sept, and 1.8 from Oct to Dec.
Which price strategy would you propose, and what economic arguments would you use? What other arguments may provide additional support for your proposed price strategy?
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Consider the market demand for a given good. If ED= -2.5 at the current market price, then a 1 percent decrease in price will result in a:
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If they both hire consultants, they cancel each other out and they expect to get half the pot minus the consulting costs.
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Using the quantity theory of money, suppose that this year's money supply is $50 billion, nominal GDP is $1 trillion, and the real GDP is $500 billion.
The monetary base increased by 20% during the contraction of 1929-1933, but the money supply fell by 25%. Why did this occur?
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A) Given the cross-price elasticity of demand, what is the relationship between coffee and doughnuts? B) If the price of coffee increases by 2% what will be the change in demand for doughnuts?
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