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Question about Elasticity
Coca-Cola in dispensers located on a golf course sells for $1.25 a can, and golfers buy 1,000 cans. Assume the course raises the price to $1.26 (assume a penny raise is possible) and sales fall to 992 cans.
a. Using the midpoint formula, what is the price elasticity of demand for Coke at these prices?
b. Assume the demand for Coke is a linear line. Would the elasticity of demand be elastic or inelastic at 75 cents a can?
c. At $2.00 a can?
The firm is considering a movement of the plant to Shenzen, China where labour is cheaper. The same mathematical relationship between inputs and outputs will hold.
The manager of a national retailing outlet recently hired an economist to estimate the firm's production function. Based on the economist's report, the manager now knows that the firm's production function
Graph the accompanying demand data, and then use the midpoint formula for E d to determine price elasticity of demand for each of the four possible $1 price changes.
What is your marginal revenue and marginal cost functions? To maximize profits, how much should you produce at plant 1? At plant 2? What is the price that maximizes profits?
The president of a small industry has been complaining to his controller about rising labor and material costs.
If you can borrow (and lend) money at an interest rate of 8 percent, will the investment be a profitable undertaking? Is the project profitable at an interest rate of 12 per cent? Provide numerical calculations in support of your answers.
Explain why this strategy may in fact, be rational Also, identify at least two other strategies that might permit Argyle to earn higher profits.
Discuss the limitations of this model as an explanation of the effects of government expenditure on GDP.
Mention four key points from the reading assignments that were emphasized in the simulation. Find out how price elasticity of demand affects the decision making of the consumer and of the organization.
Please evaluate the effect of the following scenario on the AD curve, AS curve, and accordingly the effect on equilibrium price level and equilibrium GDP/output.
Assume that the following information about the economy is correct. The potential GDP is 3 percent. Real GDP has fallen at a minus two percent rate in the last 12 months.
Discuss the likely sources of the economies of scale that underlie the large size of these firms. [Note: the stocks of private firms are not traded on public stock exchanges
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