What is the price elasticity of demand

Reference no: EM133206110

Assignment Questions -

Q1. Last month the company sold 10 million of their Standard boxes at an average price of $18.00 per box. This week the company raised the average price to $18.40 per box. The company sold 9.5 million boxes for the month. The variable cost per unit is $10 and the fixed costs are $10 million per month. Assume these costs don't change in the short term.

What is the price elasticity of demand?

Can the demand be characterized as price elastic, price inelastic, or neither?

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Q2. After reviewing last month's results, the company decided to lower the price of a Standard box to $17.60. After this change, the volume sold increased to 10.5 million boxes for the month.

What is the price elasticity of demand?

Can the demand be characterized as price elastic, price inelastic, or neither?

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Q3. Last month the company sold 1.55 million Deluxe boxes at an average price of $28 per box. This month the company raised the price to $29 and sold 1.35 million boxes. The variable cost per unit is $20 and the fixed costs are $3 million per month. Assume these costs don't change in the short term.

What is the price elasticity of demand?

Can the demand be characterized as price elastic, price inelastic, or neither?

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Q4. After reviewing the last results, the company decided to lower the price to $27 and sold 1.65 million boxes for the month.

What is the price elasticity of demand?

Can the demand be characterized as price elastic, price inelastic, or neither?

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Reference no: EM133206110

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